X & Y Ltd is desirous to purchase a business and has consulted you, and one...
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X & Y Ltd is desirous to purchase a business and has consulted you, and one point on which you are asked to advise them, is the average amount of working capital which will be required in the first year's working. You are given the following estimate and are instructed to add 10 per cent to your computed figure to allow for contingencies. Particulars Average amount backed up for stocks: Stocks of finished product Stocks of stores and materials (11) Average credit given: Inland sales, 6 weeks' credit Export sales, 1.5 weeks' credit (iii) Average time lag in payment of wages and other outgoings: Wages, 1.5 weeks Stocks and materials, 1.5 months Rent and royalties, 6 months Clerical staff, 0.5 month Manager, 0.5 month Miscellaneous expenses, 1.5 months (iv) Payment in advances: Sundry expenses (paid quarterly in advance) Amount for the year Rs. 5,000 8,000 3,12,000 78,000 2,60,000 48,000 10,000 62,400 4,800 48,000 8,000 11,000 Undrawn profits on an average throughout the year Set up your calculations for the average amount of working capital required. X & Y Ltd is desirous to purchase a business and has consulted you, and one point on which you are asked to advise them, is the average amount of working capital which will be required in the first year's working. You are given the following estimate and are instructed to add 10 per cent to your computed figure to allow for contingencies. Particulars Average amount backed up for stocks: Stocks of finished product Stocks of stores and materials (11) Average credit given: Inland sales, 6 weeks' credit Export sales, 1.5 weeks' credit (iii) Average time lag in payment of wages and other outgoings: Wages, 1.5 weeks Stocks and materials, 1.5 months Rent and royalties, 6 months Clerical staff, 0.5 month Manager, 0.5 month Miscellaneous expenses, 1.5 months (iv) Payment in advances: Sundry expenses (paid quarterly in advance) Amount for the year Rs. 5,000 8,000 3,12,000 78,000 2,60,000 48,000 10,000 62,400 4,800 48,000 8,000 11,000 Undrawn profits on an average throughout the year Set up your calculations for the average amount of working capital required.
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Average amount of working capital required 1 Average amount backed up for stocks Stocks of finished ... View the full answer
Related Book For
Fundamentals of corporate finance
ISBN: 978-0470876442
2nd Edition
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates
Posted Date:
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