1. Discuss the various factors that you would take into consideration before assessing the working capital requirements.
2. You are required to prepare a Cash Budget of XYZ Ltd. for the months April, 2023 to July, 2023 (four months) from the details given below:
(a) Estimated sale during 2023 (Rs.)
Feb.
12,00,000
March
12,00,000
April
16,00,000
May
20,00,000
June
18,00,000
July
16,00,000
Aug.
14,00,000
b) On an average 20% of sales are cash sales. The credit sales are realized in the third month (January sales in March).
c) Purchases amount to 60% of sales.
d) Variable expenses (other than sales commission) constitute 10% of sales and there is a time lag of half a month in these payments.
e) Commission on sales is paid at 5% of sales value and payment is made in the third month.
f) Fixed expenses per month amount to Rs. 75,000 approximately.
g) Other items anticipated: Due
Interest payable on deposits Rs. 1,60,000 (April, 2023)
Sales of old assets Rs. 1,25,000 (May, 2023)
Payments of tax Rs. 80,000 (June, 2023)
Purchase of fixed assets Rs. 6,50,000 (July, 2023)
h) Opening cash balance Rs. 1,50,000
3. As a Finance Manager, which sources you would prefer to raise short term loans from the money market for meeting working capital needs of your business and why?
4. The Balance Sheet of Alpha Co. Ltd. is as given below.
Balance Sheet of Alpha Co. Ltd. as on 31 st March 2023
Assets Rs. lakhs Liabilities Rs. lakhs
Fixed assets 1,000 Equity shares of Rs.
10 each
400
Current assets:
Raw materials
Work-in-progress
Finished goods
Debtors
Cash at bank
200
300
150
200
110 960
Retained earnings
11% Debentures
Public deposits
Trade Creditors
Bills payable
400
600
200
160
200
Total 1,960 Total 1,960
You are required to calculate the amount of maximum permissible bank finance by all three methods for working capital as per Tandon Committee Norms. Assume the level of core current assets to be Rs. 60 lakhs. Calculate the current ratios as recommended by the committee, assuming that the bank has granted MPBF.
5. If you are finance manager of an MNC, what circumstances would you consider using Eurocurrency markets? Also explain why you have selected these markets instead of borrowing from domestic markets.
