X & Y Ltd is desirous to purchase a business and has consulted you, and one...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
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.
Expert Answer:
Answer rating: 100% (QA)
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:
Students also viewed these general management questions
-
ThumbShack Inc is a 20year old customercentric company that works on the standard eCommerce business model to sell its wares to customers The company has a comprehensive fully functional web site...
-
You are entering negotiations to purchase a business and are trying to formulate a negotiating strategy. You want to determine the minimum price you should offer and the maximum you should be willing...
-
A mining company needs to estimate the average amount of copper ore per ton mined. A random sample of 50 tons gives a sample mean of 146.75 pounds. The population standard deviation is assumed to be...
-
Three taxpayers each wish to make a BADR claim in relation to a qualifying disposal made during 2020-21. Their previous claims are as follows: (a) Gemma made a BADR claim in relation to a gain of...
-
The absentee rate for bus drivers in a large school district has been 5% in recent years. During the past few months, the school district and the bus drivers union have been engaged in negotiations...
-
Which of the following are considered to be advantages of operating leases for the lessee? (a) Access to a wide variety of non-current assets. (b) Tax deductibility of lease payments. (c) The risk of...
-
Use the data in Short Exercise 16-12 to prepare Little People Learning Center's (LPLC) statement of cash flows for the year ended June 30, 2005. LPI.C uses the direct method for operating activities....
-
It is January 2 and Twin Pines Farm is putting together its annual net worth statement Following are a nurmher of pieces of information they have collected. Help them fit it all together using the...
-
How can you simultaneously hedgetransactionexposure andtranslationexposure of the same firm? What are the argumentsagainsta MNC hedging transaction exposure? Why should companiesnot hedge? What are...
-
Wilson Vistas is a leading producer of vinyl replacement windows. The company's growth strategy focuses on developing domestic markets in large metropolitan areas. The company operates a single...
-
3. Consider a portfolio where equal investment is made in each of the n stocks. Thus, the proportion invested in each stock is 1/n. Prove that the portfolio variance will be: Portfolio Variance =...
-
What is the pro forma statement, and how important is it for a business?
-
What kind of business would use the price-earnings ratio (RIE) to estimate its own value?
-
Briefly explain the financial ratiosbased value method.
-
Briefly compare replacement value to liquidation value of an asset.
-
List at least five advantages of sole proprietorship.
-
What tradeoffs should be considered in evaluating the merits of adding additional CDCs? What costs are likely to increase and what costs are likely to decrease with this change? Beyond cost, what...
-
A sample statistic will not change from sample to sample. Determine whether the statement is true or false. If it is false, rewrite it as a true statement.
-
Identify whether the following transactions are primary market or secondary market transactions. a. Jim Hendry bought 300 shares of IBM through his brokerage account. b. Peggy Jones bought $5,000 of...
-
You are concerned about one of the investments in your fully diversified portfolio. You just have an uneasy feeling about the CFO, Iam Shift y, of that particular firm. You do believe, however, that...
-
Zero coupon bonds: Ten-year zero coupon bonds issued by the U.S. Treasury have a face value of $1,000 and interest is compounded semiannually. If similar bonds in the market yield 10.5 percent, what...
-
What steps are necessary to record services performed on account for Wild Water Sports?
-
How does the QuickBooks Accountant software respond if a bill is entered with a vendor name that is not included on the vendor list?
-
What are the steps for paying sales tax?
Study smarter with the SolutionInn App