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III. A firm has applied for working capital finance from a commercial bank. You are requested by the bank to prepare an estimate of the working capital requirements of the firm. The following is the firm's projected profit and loss account.

III. A firm has applied for working capital finance from a commercial bank. You are requested by the bank to prepare an estimate of the working capital requirements of the firm. The following is the firm's projected profit and loss account.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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I. A firm has applied for working capital finance from a commercial bank. You are requested by the bank to prepare an estimate of the working capital requirements of the firm. The following is the firm's projected profit and loss account. In Rs 2,247,000 Sales |Cost of goods sold |Gross Profit 1.637,100 609,900 Administration expenses 149,800 Selling expenses 139,100 Profit before tax 321,000 Tax 107,000 Profit after tax 214,000 The cost of goods is calculated as follows. |Material Used Wages and other expenses 898,800 668,750 Depreciation 251,450 1,819,000 Less: Stock of finished goods (10% 181,900 product not yet sold) Cost of goods Sold 1,637,100 The figures given above relate only to the goods that have been finished, and not to work in progress; goods equal to 15 per cent of the year's production(in terms of physical units) are in progress on an average requiring full material but only 40 percent of other expenses. The firm has a policy of keeping two months consumption of material in stock. All expenses are paid one month in arrears. Suppliers of material grant one and a half month credit; Sales are 20 percent cash while remaining sold on two months credit.
Transcribed Image Text:I. A firm has applied for working capital finance from a commercial bank. You are requested by the bank to prepare an estimate of the working capital requirements of the firm. The following is the firm's projected profit and loss account. In Rs 2,247,000 Sales |Cost of goods sold |Gross Profit 1.637,100 609,900 Administration expenses 149,800 Selling expenses 139,100 Profit before tax 321,000 Tax 107,000 Profit after tax 214,000 The cost of goods is calculated as follows. |Material Used Wages and other expenses 898,800 668,750 Depreciation 251,450 1,819,000 Less: Stock of finished goods (10% 181,900 product not yet sold) Cost of goods Sold 1,637,100 The figures given above relate only to the goods that have been finished, and not to work in progress; goods equal to 15 per cent of the year's production(in terms of physical units) are in progress on an average requiring full material but only 40 percent of other expenses. The firm has a policy of keeping two months consumption of material in stock. All expenses are paid one month in arrears. Suppliers of material grant one and a half month credit; Sales are 20 percent cash while remaining sold on two months credit.
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