Prepare an estimate of working capital requirement from the following information of a trading concern: Projected Annual Sales: ₹6,50,000 Percentage of net Profit on Sales: 25% Average Credit period allowed to debtors: 1
CS Professional · Banking - Law and Practice · PYQS · December 2019
Prepare an estimate of working capital requirement from the following information of a trading concern: Projected Annual Sales: ₹6,50,000 Percentage of net Profit on Sales: 25% Average Credit period allowed to debtors: 10 Weeks Average Credit period allowed by Creditors: 4 Weeks Average Stock holding in terms of sales requirement: 8 Weeks Calculate: Working Capital Gap.
Answer & Explanation:
Working Notes: Cost = Sales - Net Profit = 6,50,000 - 25% on 6,50,000 = 4,87,500 Current Assets Debtors (10 weeks) at cost (₹4,87,500 X 10 weeks) / 52 Weeks = ₹93,750 Stock (8 Weeks) (₹5,20,000 X 8 Weeks) / 52 Weeks = ₹75,000 Total Current Assets = ₹1,68,750 Current Liabilities Creditors (₹5,20,000 x 4 Weeks) / 52 Weeks = ₹37,500 (ii) Working Capital Gap (1,68,750 - 37,500) = ₹1,31,250
Topics: Financial Analysis
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