The following information is available for Vision Ltd. : Particulars: Cost of Production ₹15,48,000, Cost of goods sold ₹14,61,000, Average stock of work-in-progress ₹94,600, Average stock of finished goods ₹2,43,500, Ad

Operating Cycle = R + W + F + D - C Where, R = Raw material storage period = 65 days W = Work-in-progress Inventory holding period F = Finished goods storage period D = Receivables (Debtors) collection period = 36 days C = Credit period allowed by suppliers (Creditors) = 63 days Work-in-progress Inventory holding period (W) = Average WIP inventory / Average cost of production per day = ₹94,600 / (₹15,48,000 / 360 days) = 22 days Finished goods storage period (F) = Average stock of finished goods / Average Cost of Goods Sold per day = ₹2,43,500 / (₹14,61,000 / 360 days) = 60 days Net Operating Cycle = 65 + 22 + 60 + 36 - 63 days = 120 days No. of operating cycles in year = No. of days in year / Operating cycle period = 360 days / 120 days = 3 times Amount of working capital required = Annual operating cost / Number of Operating Cycles = (₹14,61,000 + ₹4,14,000) / 3 = ₹6,25,000