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PC Ltd. Sells its product on a gross profit of 20% on sales

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1 PC Ltd. Sells its product on a gross profit of 20% on sales
PC Ltd. Sells its product on a gross profit of 20% on sales. The following information is extracted from its annual accounts for the year ended 31st December 2012. Particulars RS. Sales at 3 months credit 40,00,000 Raw material 12,00,000 Wages paid –avg. time lag 15 days 9,60,000 Manufacturing expenses paid-1 month in arrears Administrative exp. Paid-1 month in arrears 4,80,000 Sales Promotion exp. –payable half yearly in advance 2,00,000 The company enjoy 1 month credit from suppliers of RM and maintains 2 months stock of RM & 1 ½ months finished goods. Cash balance is maintained at Rs.1,00,000 as a precautionary balance. Assuming a 10% margin, Find out the wc requirements

2 The company enjoy 1 month credit from suppliers of RM and maintains 2 months stock of RM & 1 ½ months finished goods. Cash balance is maintained at Rs.1,00,000 as a precautionary balance. Assuming a 10% margin, Find out the wc requirements .

3 Current Assets Stock of RM (12,00,000*2/12) 2,00,000 Stock of Finished goods (40,00,000*80/100*1,5/12) 4,00,000

4 Statement of Working capital requirements
Current Assets Stock of RM (12,00,000*2/12) Stock of Finished goods (40,00,000*80/100*1.5/12) Debtor at cost (40,00,000*80/100*3/12) Advance payment of sales promotion (2,00,000*6/12) Cash Total CA

5 Statement of Working capital requirements
Current Liabilities Creditors Wages outstanding Manufacturing exp. outstanding Admin. Exp. outstanding NWC

6 Statement of Working capital requirements
Current Assets Stock of RM (12,00,000*2/12) 2,00,000 Stock of Finished goods (40,00,000*80/100*1.5/12) 4,00,000 Debtor at cost (40,00,000*80/100*3/12) 8.00,000 Advance payment of sales promotion (2,00,000*6/12) 1,00,000 Cash Total CA 16,00,000

7 Statement of Working capital requirements
Current Liabilities Creditors (12,00,000*1/12) 1,00,000 Wages outstanding (9,60,000*.5/12) 40,000 Manufacturing exp. outstanding Admin. Exp. outstanding (4,80,000*1/12) Total Current liabilities 2,80,000 NWC CA-CL (16,00,000-2,80,000) 13,20,000 Contingencies (13,20,000*10/100) 1,32,000 WC Required 14,52,000

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