Question

The annual figures of Alpha Ltd are as follows: (i) Sales at home, at 1 month credit Rs. 12,00,000. (ii) Export at 3 months credit, S.P. 10% below the home price Rs. 5,40,000. (iii) Materials used, suppliers extend 2 months credit Rs. 4,50,000. (iv) Wages paid, half month in arreas Rs. 3,60,000. (v) Manufacturing expenses, paid one month in arreas Rs. 5,40,000. (vi) Depreciation on fixed assets Rs. 60,000. (vii) Administrative expenses, paid one month in arrear Rs. 1,20,000. (viii) Sales promotion expenses, payable quarterly in advance Rs. 60,000. Alpha Ltd. sells goods in the domestic market on a gross profit of 25%. It keeps one month stock of raw materials as well as finished product and believes in keeping Rs. 1,00,000 available to it. You are required to calculate the working capital requirement of the company, assuming 15% safety margin.

Answer 1

(i) Sales at home, at 1 month credit Rs. 12,00,000.(ii) Export at 3 months credit, S.P. 10% below the home price Rs. 5,40,000.(iii) Materials used, suppliers extend 2 months credit Rs. 4,50,000.(iv) Wages paid, half month in arreas Rs. 3,60,000.(v) Manufacturing expenses, paid one month in arreas Rs. 5,40,000.(vi) Depreciation on fixed assets Rs. 60,000.(vii) Administrative expenses, paidone month in arrear Rs. 1,20,000.(viii) Sales promotion expenses, payable quarterly in advance Rs. 60,000.Alpha Ltd. sells goods in the domestic market on a gross profitof 25%. It keeps onemonth stock of raw materials as well as finished product and believes in keeping Rs.1,00,000 available to it. You are required to calculate the working capital requirement ofthe company, assuming 15% safety margin.