WORKING CAPITAL STATEMENT

Problem1:
Prepare an estimate of working Capital requirement from the following information
of trading concern:
(a) Project Annual Sales
1,00,000 units
(b) Selling Price
Rs.8 per unit
(c) % of Net Profit on sales
25%
(d) Average credit period allowed to customers
weeks
(e) Average credit period allowed by suppliers
weeks
(f) Average stock holding in terms of sales requirement
weeks
(g) Allow 10% for contingencies

8
4
12

Problem 2 :
A proforma cost sheet of a company provides the following particulars:
Elements of cost
Material

40%

Direct Labour
20%
Overheads
20%
The following further particulars are available:
(a) It is proposed to maintain a level of activity of 2,00,000 units
(b) Selling Price is Rs. 12/- per unit
(c) Raw materials are expected to remain in stores for an average period of one
month.
(d) Materials will be in process, on average half a month
(e) Finished goods are required to be in stock for an average period of one month.
(f) Credit allowed to debtors is two months
(g) Credit allowed by suppliers is one month
You may assume that sales and production follow a consistent pattern.
You are required to prepare a statement of working capital requirement, a forecast
Profit & Loss Account and Balance Sheet of the company assuming that:
Rs.
Share Capital
15,00,000
8% Debentures
2,00,000
Fixed Assets
13,00,000

Problem 3:

X & Co. is desirous to purchase a business and has consulted you and one point on
which you are asked to advise them is the average amount of working capital which
will be required in the first years working.
You are given the following estimates and are instructed to add 10% to your
computed figure to allow for contingencies:
Figures for the year
(Rs.)
i) Amount blocked up for stocks:
Stocks of finished product
5,000
Stocks of stores, materials etc.
8,000
ii)
Average credit given:
Inland Sales -6weeks credit
3,12,00
Export Sales 1 weeks credit
78,000
iii)
Lag in payment of wages and other outgoings:
Wages - 1 weeks
2,60,000
Stock of materials, etc. 1 months
48,000
Rent, Royalties, etc 6 months
10,000
Clerical Staff - Month
62,400
Manager month
4,800
Miscellaneous Expenses 1 Month
48,000
iv) Payment in advance:
Sundry Expenses (paid quarterly in advance)
8,000
v) Undrawn profit on the average throughout the year
11,000
Set up your calculations for the average amount of working capital required.
Problem 4:
A proforma cost sheet of a company provides the following particulars:
Elements of cost
Amount per
unit(Rs.)
Raw material
80
Direct labour
30

Overheads
60
Total Cost
170
Profit
30
Selling Price
200
The following further particulars are available:
Raw materials are in stock on an average for one month. Materials are in
process on an average for half a month. Finished goods are in the stock on an
average for one month.
Credit allowed by suppliers is one month. Credit allowed to customers is two
months. Lag in payment of wages is 1 weeks. Lag in payment of overhead
expenses is one month.
One-fourth of the output is sold against cash. Cash in hand and at bank is
expected to be Rs. 25,000.
You are required to prepare a statement showing the working capital needed
to finance a level of activity of 1,04,000 units of production.
You may assume that production is carried on evenly throughout the year,
wages and overheads accrue similarly and a time period of 4 weeks is equivalent to
a month.
Problem 5:
From the information given below you are required to prepare a projected Balance
Sheet, Profit aand Loss Account and then an estimate of Working Capital
requirements:
Rs.
(a) Issued Share Capital
3,00,000
6% Debentures
2,00,000
Fixed assets at cost
2,00,000
(b) The expected ratios to selling price are:
Raw materials
50%
Labour
20%
Overheads
20%
Profit
10%
(c) Raw Materials are kept in store for an average of two months
(d) Finished Goods remain in stock for an average period of three months
(e) Production during the previous year was 1,80,000 units and it is planned to
maintain the same in the current year also.

(f) Each unit of production is expected to be in process for half a month

(g) Credit allowed to customers is three months and given by suppliers is two
months
(h) Selling price is Rs. 4 per unit
(i) There is a regular production and sales cycle.
(j) Calculation of debtors may be made at selling price.