Working Capital Calculation

WORKING  CAPITAL   CALCULATION

A) Current  Assets

1) Stock  of Raw Material (1mth)  = Annual  Raw mat  X  2/12mth

2) Stock  of  WIP  (1.5 mth)

R Mat–Annual  Raw mat  X  1.5/12mth

+Labour  — Annual  Labour   X  1.5/12mth   X   1/2

+Expenses — Annual  Expenses  X  1.5/12mth   X   1/2

3) Stock  of  Finished  goods (2.5 mth) = Total Annual Cost of Prodn.  X   2.5/12mth

4) Bills  Receivable (3mth) = Credit  Sales   X 3/12 mth

5) Debtors ( 2mth)  = Credit  Sales   X 2/12 mth

6) Advance  for  Raw Material(Adv. To creditors) (0.5mth)= Annual  Raw mat  X

0.5/12mth

7) Advance  Fixed  Overheads (1.2mth) = Annual  Fixed  Overheads  X  1.2/12mth

8) Prepaid  Expenses(1mth) = Annual  Expenses   X   1/12 mth

9) Cash & Bank Balance

Total Current  Assets (CA)

Less: Current  Liabilities

1) Creditors  for  Materials (1mth) = Annual  Raw mat  X    1/12mth

2)Outstanding  Wages (1mth) =  = Annual  Labour charges   X  1/12mth

3) Bills  Payable(2mth) =  Credit  Purchases  X  2/12mth

Total Current  Liabilities  (CL)

Working  Capital ( CA   –  CL  )

Eg.—1)Cash  balance is 30% of monthly  Profit—then  prepare cost structure. Find Annual  profit  (profit  per unit  X    units  produced) .Find 30% of Annual profit.

2) If inland & export Sales  given calculate Debtors for inland & export Sales separately.

1)      Cost  W. Cap–àCalculate  Debtors  and Bill  Receivables  on Total  cost  instead of  Credit  sales.

2)      Cash Cost  W.Cap.->  Calculate  stock  of  WIP  & Finished  goods and  Debtors  and Bill  Receivables at  Cash Cost ( Total  Cost other than Depreciation)