The projected financial information of M/s Bansiwala is as given below : Projected Annual Sales: ₹ 6,50,000 Percentage of net profit on sales: 25% Average credit period allowed to debtors: 10 weeks Average credit period

Calculation of Working capital Working Notes: Sales - Net Profit = Cost of goods sold ₹ 6,50,000 - 25% on ₹ 6,50,000 = ₹ 4,87,500 CURRENT ASSETS (CA) Debtors (10 weeks) at cost (₹ 4,87,500 x 10 weeks)/ 52 Weeks = ₹ 93,750 Stock (8 Weeks) (₹ 4,87,500 x 8 Weeks)/ 52 Weeks = ₹ 75,000 Total Current Assets = ₹ 1,68,750 CURRENT LIABILITIES (CL) Creditors (₹ 4,87,500 x 4 Weeks)/ 52 Weeks = ₹ 37,500 (i) Current Ratio: CA/CL - (₹ 1,68,750 / ₹ 37,500) = 4.5:1 (ii) Working Capital (CA-CL): (₹ 1,68,750 - ₹ 37,500) = ₹ 1,31,250 **Some students may calculate the debtor at full value, in such case, the alternative solution would be as under: CURRENT ASSETS Debtors (10 weeks) at sales price (₹ 6,50,000 x 10 weeks)/52 Weeks = ₹ 1,25,000 Stock (8 Weeks) (₹ 4,87,500 x 8 Weeks)/ 52 Weeks = ₹ 75,000 Total Current Assets = ₹ 2,00,000 CURRENT LIABILITIES Creditors (₹ 4,87,500 x 4 Weeks)/ 52 Weeks = ₹ 37,500 (i) Current Ratio (₹ 2,00,000 / ₹ 37,500) = 5.33:1 (ii) Working Capital (₹ 2,00,000 / ₹ 37,500) = ₹ 1,62,500