PROBLEM NO.

1
The Balance Sheet of XYZ Limited as on March 31, 2012 is as follows:

Balance Sheet as on March 2012

Liabilities
ESC
R&S
LT Debt
Comm.
Borrowings
OCL

Rs. in Lacs

Bank

Assets

2.00 NFA
1.75
4.00 Current Assets
2.10 Inventory
2.15 Receivables
Cash
12.00

Rs. in Lacs
4.00
5.20
1.60
1.20
12.00

Income Statement for the year ended March 2012

Rs. in Lacs

Net sales (Cr.)

15.00

Less: cost of goods sold

Profit
Less: other operating
expenses
Operating profit
Non-operating Income
PBIT
Less: Interest
PBT
Less: Tax
PAT

9.00
6.00
4.50
1.50
0.20
1.70
0.60
1.10
0.50
0.60

The industry averages of certain important ratios in which XYZ Limited operates are
as follows:
Current Ratio
Total debt to equity
Total asset
turnover
Net profit margin
Return on equity
Collection period

2
1.8
1.4 Times
4%
16.8%
30 days

Calculate the above ratios for XYZ Limited and benchmark its performance.

ANSWER (PROBLEM 1)
Current Ratio

Total debt to equity

Collection period

=
Current Assets
Current Liabilities
=

Inventory + Cash + Receivables

OCL + CBB

5.2+1.6+1.2
2.15+2.1

1.882

LT Debt + CBB+OCL
Equity+ R &S

4+2.1+2.15
2+1.75

Avg. Debtors * 365

Cr. Sales

1.6*365
15

38.93 = 39 days

Total asset turnover

Net profit margin

Return on equity

= 2.2

=
Net Sales
Total Assets
=

15/12 =1.25

PAT
Sales

0.6/15=0.4

PAT - Pref. Div

Net worth

0.6/ (2+1.75)

= 0.16

PROBLEM NO. 2
The following is the financial statement of ABC Limited for the year ended
March 2012.
Balance Sheet as on March 2012
Liabilities
Creditors
Bills Payable
O/S expenses
Tax payable
LT Debt
Redeemable
Equity
Equity
Reserves
Total

Rs. in Lacs
2.80
1.40
0.40
1.00
8.40
Pref. 2.80

Assets
Cash
Debtors
Stocks
FA
Goodwill

1.40
2.80
21.00

Rs. in Lacs
0.70
3.50
4.90
10.50
1.40

21.00

P & L A/c for the year ended 31/03/2012

Rs. in Lacs
Sales
Cash
Credit
Less: Expenses
Factory cost of goods sold
Selling & Admin
Depreciation
Interest
PBT
Tax
PAT
Less: Pref. Div
Less: Equity Div
Transfer to Surplus

2.8
11.2
8.4
1.4
0.98
0.42

14.00

11.20
2.80
1.40
1.40

0.17
0.25
0.98

Calculate current ratio, Acid test ratio, Debtors turnover, Net profit, Return on
shareholders equity, Interest coverage, asset turnover ratios
.

ANSWER (PROBLEM 2)
Current Ratio

=
Current Assets
Current Liabilities
=

Cash + Debtors + Stocks

Cash + Bills payable + O/s expenses + tax

0.7+3.5+4.9
2.8+1.4+0.4+1

1.625

Current Assets
Current liabilities

Cash+ debtors
Current liabilities

Cr Sales
Av. Debtor

11.2/3.5

PAT
Sales

1.4/14

0.1

10%

payable

Acid test

Debtor turnover

Net profit margin

Return on shareholder equity =

= 0.75

= 3.2

PAT-Pref. Div
Net worth

=
=

1.4-0.17/(ESC+R&S)-Goodwill
1.23/(4.2-1.4)

0.4393

43.93%

Cont/-

Interest coverage

PBDIT-T
Interest

PAT + Depreciation + Interest

Interest
(1.4+0.98+0.42)/ 0.42 = 6.6 times

=
Total asset turnover

=
Sales
Total Assets Goodwill
=

14
21-1.4

0.714

Times

PROBLEM 3
A Company has an equity capital of Rs. 1.0 Lac. The financial ratios
Company are as follows:
Current debt / Total debt
Total debt / equity
Fixed asset / equity
Total asset turnover
Inventory Turnover

0.40
0.60
0.60
2.00 Times
8.00 Times

Complete the balance sheet given below.

ANSWER:
Liabilities
ESC
Current
Debt
LT Debt

Rs.
24000

Assets

Rs.

100000 Fixed Assets

Cash
60000

36000 60000
Inventory
160000

40000

60000
100000
160000

for the

PROBLEM 4
A Company has the following financial ratios. Complete the Balance Sheet.
Total Debt / net worth
Total asset turnover
GP (PBIDT)
Average collection period
Inventory turnover ( at COGS)
Acid test ratio

0.5:1
2 times
30%
40 days
3 times
0.75

ANSWER:
Assets
Cash
Accounts
receivables
Inventory
FA
Total

Rs.
Liabilities
23116 Equity (given)
164384 R & S (given)
350000 Accounts
payable
212500
750000 Total

Rs.
200000
300000
250000
750000

PROBLEM 5
From the following financial ratios & details prepare the Balance Sheet of
ABC Limited for the year ending March 31, 2012.
CR

Debt / equity

2.5

times

3.5

FA

350000

14% UTI loan

10% Non-convertible debn.

Debtors / Cash

8
3:2

Creditors / bills payable

2:3

Stock / (Debtors + Cash)

0.67

ESC / Reserves

3:1

Reserves / Irredeemable PSC =

1:1

The company has no accumulated losses nor any prior year expenses /
adjustments. There are only 2 items of borrowed funds and 2 items of
current liabilities. During the year the Company did not redeem any
portion of its loans / debt nor did it incrementally borrow any funds. It
paid an interest of Rs. 19600/- during the year to the UTI.
ANSWER:
Liabilities
ESC
PSC
R&S
10 % Debn
14 % UTI

Assets
51429
17142
17142
160000
140000

FA
Stock
Debtors
Cash

350000
59521

CL
Creditors
B/P

23808
409521

409521

PROBLEM 6
The Balance sheet of X Y Z Limited for 2 consecutive years
Prepare a fund flow statement and your comments thereof.
Liabilitie
s

2011

2012

ESC

150

150

R&S

250

325

Dif

Assets

2011

0 NFA

LTL

250

350

Debentur
es
FD
(<1
Yr)
CBB
Trade
Creditors

100

175

50

25

250
200

225
250

1250

1500

2012

5
50

75 Investmen
ts
100 Curr.
Assets
75 Debtors

is given below.

Dif

8
00

2
50

100

(50)

250

300

50

(25) Inventory

200

225

25

(25) Cash
50

100

75

(25)
0

1250

1500

250

250

50

The Company for the financial year ended paid a dividend of Rs. 25Lacs
on a turnover of Rs. 2000 Lacs and a PAT of Rs. 700 Lacs.

ANSWER:
Working Capital based Fund Flow Statement
STS

Trade Creditors
From LTU

STU

50 FD
50 CBB
Debtors
Inventory
Cash
100

25
25
50
25
(25)
100

LTS

LTU

Term Loans
R&S
Acc Depreciation
To STU

75 NFA
100 To STU
75
50
300

250
50
300

PROBLEM 7
ABC Limited has the following balance sheet for the year ended March 31, 2011
&
March 31, 2012.
Liabilitie
s

3/1
1

3/1
2

Di
f

CBB

146

172

26

35

40

162

184

22

22 Sundry
Debtors
3 Inventory

25

40

15

80

200

12
0

(20)

FD(1<1Yr)
Creditors
OCL
Term
Loans
ESC
(Rs.10/Paid up)

Adj

Ag
g

Assets

26 Cash

3/1
1
16

3/1
2

Di
f

124

10
8

5
40

65

25

198

164

15 OCA

45

52

(34
)
-

0 GFA

506

640

13
4

15

15

805

106
0

Adj
(8)
(150
)
-

Ag
g
(50
)
25
(34
)
7

(25) 127
18

(100
)
Pre. Exp
R&S

110

150

40

20

(20
)

(50)
(25)
(5)
Acc Dep

242

266

24

805

106
0

25
5

15

39
25
5

15

Prepare an operational fund flow statement for the Company taking into
account the following additional info, and your comments thereof.
1. The Company during the period under review issued bonus shares in the
ratio 1:4. This
was followed by a rights issue in the ratio 1:1 at a
premium of Rs. 5/- per share. The entire proceeds of the rights issue was
to part finance the companys expansion project.
2. During the period the Company revalued its assets to the tune of Rs. 25
Lacs.
3. A profit of Rs. 5 Lac was made on sale of an asset (which was
rendered surplus) purchased 5 years back for Rs. 18 Lacs. The WDV
value of the asset is Rs. 3.0 Lacs.

ANSWER
Working Capital based Fund Flow Statement:
STS

CBB
FD
Creditors
OCL
Inventory

LTS

Term Loans
R&S
Acc Depreciation
To STS

STU

26
5
22
3
34
90

Cash
Debtors
OCA
To LTU

(50)
25
7
108
90

LTU

15 Preliminary Exp
(20) GFA
39
108
142

15
127
142

PROBLEM 8
ABC Engineering Company wants to determine the Working Capital
requirement for the ensuing year for a level of activity of 12000 units
per month i.e. Produce and sell 144000 units per annum. The following is
the additional information:
Per unit cost in
Rs.
Raw material
Direct Labour
Overheads
Profit
Selling price

90
40
75
205
60
265

The Company follows the following Inventory norms:

Raw materials stock is 1 month, WIP 2 weeks, FG 1 month. Receivables 2
months and creditors is 1 month. Overheads are paid at the end of every
month and wages are paid after every 1.5 weeks. 20% of the sales are on
cash basis and the Company desires to maintain
a cash balance of Rs.
60,000/-. Determine the max permissible bank finance as it may be eligible to
avail of at a current ratio of 1.33. WIP is at 50% value addition with 100% RM
cost.

ANSWER
Working Capital Statement
Sort term uses
Raw materials
WIP
FG
Receivables
cash
Gross working capital

1080000
885000
2460000
3936000
60000
842100
0

Short term
sources
Creditors
O/s wages
O/s OHS
MPBF
LTS

PROBLEM 9
Extract of the Balance Sheet of XYZ Ltd is as follows:
Year ended March 31
Op. Bal
RM
WIP
FGs
Rec
Cred

(Rs. in Lacs)
2012

2011
91
26
70
48
77

115
27
98
40
59

Cl. Stock
RM
WIP
FGs
Rec
Cred

115
27
98
40
59

178
14
135
37
77

Extract of P & L
RM consumption
Depreciation

330
18

339
18

1080000
180000
900000
4155750
2105250
8421000

Excise Duty
Employee Exp
Manufacturing
Non manuf Overheads
Sales (gross)

53
150
166
12
721

63
173
200
12
814

Calculate
1. Operating cycle time for the year 2012.
2. Estimate the Working Capital requirement for the ensuing year 12-13
assuming that the gross sales are expected to increase to 900 lacs
and the market conditions are expected to remain unchanged.

ANSWER

Operating cycle time

2012
Sales
Less excise
Net sales
RM consumed
Depreciation
Employee exp
Manufacturing exp
Add : Op WIP
Less: Cl WIP

2011814
63
751
339
18
173
200
27
14
13

Factory cost
sale
Add
OHS 12
OP FG
98
Less Closing FG
Total COGS

available for

135

743

12
98
135

(25)
718

Item
RM
WIP
FG
Receivabl
es
Creditors

Avg.
Value
147
21
117
39

Base
339
743
718
814

68

No. of
Days
156
10
58
17

402

61

Weigh
ts
42%
91%
88%
100%

No. of weighted
days
65
9
52
17
142
30
112

49%

Net operating cycle time = 112 days

GWC FOR 2012 - 2013 =

900 (less profit)* operating cycle

365

PROBLEM 10
ABC Limited has offered to sell a new packing equipment to XYZ Limited.
The list price

is $ 42000

but ABC Ltd has agreed to allow

a trade in

allowance of $ 9000 on some old equipment. The old equipment was

carried at a book value of $ 7700 and it could be sold outright for $6000.
The cash operating savings are

expected

to be $5000 annually for the next

12 years. Both the new and old equipment will have zero disposal value
after 12 years. Should XYZ Limited
computation using NPV.
12%.

buy the new equipment? Show your

Ignore taxation.

The min desired rate of return is

PROBLEM 11
XYZ Limited is considering the replacement of an old billing system with a
new software that would save $5000 per year in net cash operating cost.
The old software has zero disposal value but could be used for the next
12 years. The estimated life of the new software in 12 years and would cost
$25000. Installation period for installing the software is negligible. The min
rate of return required would be 10%.
1. What is the pay back period ?
2. Compute NPV?
3. What would be the NPV, If the useful life of the new software were to
be 8 yrs instead of 12?
4. What would be the NPV, if the annual savings were to be $ 5000 in
the first 6 years & $3000, subsequently?

5. It is possible to increase the life of the software by a further period of 3

yrs i.e. Up to 15 yrs. However, the company will have to spend $5000 in
the 9th year for the technical upgrade.
6. Ignore taxation.

PROBLEM 12
Prakash Steel Limited proposes to set up a steel plant to manufacture 20,000
tonnes of steel p.a. The selling price

of steel is Rs. 10,000 per tonne. The

other details are as follows:

1. RM costs are 50% of sales.
2. The capacity utilization for the plant will be 60% in the first year, 80%
in the 2nd year and 100% in the subsequent years. (Assume no FG
inventories).
3. Utilities & consumables are expected to be 15% of RM.

4. Salaries & wages are fixed in nature at Rs. 15 Lacs p.a. Whereas admin
and selling expenses are fixed at Rs. 20 Lacs p.a.
5. The Company provides for depreciation at 10% p.a. on SLM basis.
6. The salvage value of the assets is Rs. 12 Lacs in the terminal year.
7. The cost of the project is as follows:
a) Plant & Machinery is 17 Lacs (off which 15 Lacs will be spent in the
first year of construction & the balance Rs. 2 Lacs in the next year.
Civil construction which will cost Rs. 1 Lacs and will be completed
in a year. Total cost of the project is 18 Lacs. Construction period of
the project is 1 year. Applicable rate of tax is 40%.
b) Physical life of the project is 5 years; however market life is 4 years.
Companys cost of capital is 12% but wants a minimum return of 14%.
Ignore working capital requirement.
8. Evaluate the investment.

ANSWER
COP
Discounting factor
Gestation factor
Life of Project
Capacity
Production
Sales
Less costs

18 crores
14%
1 Yr
4 Yrs
(tones)
(in Lacs)

1
2
3
4
20000 20000 20000 20000
12000 16000 20000 20000
1200
1600
2000
2000

RM (50% of sales)
Utilities (15% of the
RM)
Salaries & Wages
Admin & selling
Depn @ 10% SLM
PBT
Less Tax 40%
PAT
Cash i/f =PAT+Depn

Yr

O/F

1000
150

15
20
180
295
118
177
357

15
20
180
465
186
279
459

15
20
180
635
254
381
561

15
20
180
635
254
381
561

(1600)

357

157

0.877

138

459

459

0.769

353

561

561

0.675

379

1713

1713

0.592

1014

(200)

1000
150

(1600)

(1600)

N/F

800
120

@14%DC
F
1

I/F

600
90

(561+1152) *

DCF

283

* WDV = 1800-720 =1080 Lacs

Salvage Value (net of tax) = 1200-1080= 120 Lacs.
Capital gain tax: Rs. 48 Lacs.
Cash Inflow (Net of tax) =

1200-48 = 1152

Since NPV is +283, the investment is viable.

PROBLEM 13
Gajanan rolling mill is considering installation of balancing equipment which
will increase production from present 10,000 tones p.a. to 12,000 tones p.a.
Following are the additional details:
1. Cost of equipment (physical life 6 years) Rs. 16 Lacs
2. Erection commissioning of equipments (will take 1 year) Rs 6 Lacs
3. The equipment will occupy space which is lying vacant at present. The
book value of the space is Rs. 150 Lacs. The allocated rent would be

Rs. 250 Lacs p.a. The space if rented out could fetch Rs. 1 Cr per year.
However, it being an integral part of the factory cannot be rented out.
4. Equipment to be depreciated at 10% SLM, which is also the max
depreciation allowable under IT Act.
5. Spare parts to be used a along with the new equipment are lying idle
with the Company whose Book value is Rs. 50,000 but has a realisable
value of Rs. 1 Lac if similar new spare parts are purchased they will
cost Rs. 1.2 Lacs.
6. Operating cycle time is 30 days.
7. The extract of the last years P & L A/c is as follows:
Sales
Less
Raw materials
Other manufacturing costs
Variable
Fixed
Allocated fixed cost
Depreciation
Selling exp. (100% Variable)
Interest
Total cost
PBT

(In Lacs)
320
180
60
20
30
2
5
3
300
20

8. The demand for the product is expected at 11500 tones p.a. for the next
5 years.
9. Better products will be available in the market after 8 yrs. However, the
Co. can sell its existing products but it will have to give a discount of
10% on sales.
10.
60% of the cost of the project will be financed through a term loan
at 18% interest. The rest of the project cost including WC will be
financed
though internal accruals.
The rest of the project will be
funded through equity whose cost is 20%. The current cost of capital is
18% for the Company.
11.

Corporate tax rate is 50%.

12.

Salvage value is at WDV.

ANSWER

COP

24*

DF
GP
LOP

14 (13.3%)
1 yr
6 yrs

P & M*
E&C
Spares
Margin for WC

16
6
1
1 **

23
24

**GWC = 1 month sale = Rs. 4.0 Lacs, LT component Rs. 1.0 Lac

Installed Capacity tonnes

1
2000

2
2000

Production

1500

1500

48

Sales (In Lacs)

Less Costs
RM
Manufacturing cost
Variable
Selling exp
Depreciation
PBT
Less Tax 50%
PAT
Cash i/f-PAT + Depreciation
Recovery of W.C.
Total Cash Flow
Yr
1
2
3
4
5
6

O/F
(23)
(1)

I/F
0
6.3
6.3
6.3
6.7
5.3
5.9

4
2000

5
2000

6
2000

1500

1000

1000

48

3
200
0
150
0
48

48

32

32

27

27

27

27

18

18

9
0.75
2.3
9
4
4
6.3
0

9
0.75
2.3
9
4
4
6.3

9
0.75
2.3
9
4
4
6.3

9
0.75
2.3
9
4
4
6.3
0.33

6
0.5
2.3
5
3
3
5.3

6
0.5
2.3
5
3
3
5.3
0.67

6.3

6.3

6.3

6.6

5.3

5.97

N/F
(23)
5.3
6.3
6.3
6.7
5.3
5.9

@14% DCF
1
0.880
0.770
0.670
0.590
0.520
0.460

DCF
(23)
4.66
4.85
4.22
3.93
2.76
2.71
0.44

+ ve NPV of Rs. 0.44 Lacs indicates marginal viability.

PROBLEM 14
The Balance sheet for ABC limited for the year ended 31/3/13 is as follows:
Liabilities
ESC

Rs. (Lacs) Assets

800 GFA

Rs. (Lacs)
1374

R&S
11% PSC
12% Debn.
11% forex loan (Rs)
CBB 16%
Creditors

600
35
65
25
175
210
1910

less Dep
NFA
CA
Cash

394
980
885
45
1910

Additional Info:
1. The PAT for the year 2012-13 (after providing Depreciation of Rs. 92 Lacs)
is Rs. 206 Lacs.
2. The company paid a dividend of 15% on ESC. The market price of the
companies equity share is Rs. 30 (FV Rs. 10/-per share). The company
anticipates a growth of 5.6 % p.a. in the ensuing years.
3. Corporate tax rate is 60%.
4. For a new project expected to
means of financing is envisaged.

cost Rs. 660 Lacs, the following

Rights issuance of Equity Rs. 180 Lacs.

15% non convert debn of Rs. 300 Lacs.

Internal accurals: Rs. 50 Lacs.

Long term loans of Rs. 100 Lacs at 14%.

Forex loans of Rs. 30 Lacs at 13%.
The Co. expects corporate tax to reduce to 50%.

Calculate
1. WACOC
2. MCOC
3. Reconcile the diff

ANSWER

Ke (ROI) = 206-3.85+36.8/ (800+600+394)

= 13.3%
Marketing cap approach
Ke = Dividend per share
Market price per share

+ grown

= 1.50 + 5.6%
30
= 10.6 %
Sourc
e
ESC
R&S
Acc. Dep
PSC
Debentur
e
Forex
Loan
CBB
Creditors

800
600
394

Sourc
e
ESC
Int. Acc

180
50

Amoun Weigh
t
t

Pre
cost

tax Post
cost
(pre
x(1-t)

tax Wt
avg.
cost
tax

1794
35
65

78%
1.5%
2.8%

13.3%
11.0%
12.0%

13.3%
11.0%
4.8%

25

1.0%

11.0%

4.4%

0.04

175
210
2304

7.5%
9.2%

16.0%
-

6.4%
-

0.48
11.2

Amoun Weigh
t
t

Pre
cost

tax Post
cost
(pre
x(1-t)
13.3%

10.37
0.16
0.13

tax Wt. avg.

cost
tax

230

35%

13.3%.

30
300

5%
45%

13%
15%

6.5%
7.5%

0.33
3.38

100

15%

14%

7.0%

1.05

4.66
Forex
Debentur
e
T.L.

660
9.42%

PROBLEM NO 15:
The following is the Balance Sheet of M/s Lotus India ltd as on 31/12/10
Liabilities

Rs.

Equity share
Capital
100000
100000
9% PSC
200000
Gen reserve
60000
14% debentures
300000
Creditors
40000
O/s expenses
20000
20000
Of 08

Assets

Rs.
Buildings

Plant

200000
Furniture
150000
Debtor
50000
Cash at bank
180000
Stock of RM

(1,000 units)
Preliminary Exp
20000
----------------------------------------------------------------------------------------------------------------------720000
720000
---------------------------------------------------------------------------------------------------------------The following is the information pertaining to 2011.
1. Sales are expected at 12,000 units with a selling price of Rs. 140/- per
unit. The Company will have to give a discount of 1.5%.
2. One unit of raw material produces one unit of finished product.
3. One unit consumes variable wages of Rs. 30/- and variable o/h of Rs.
20/-. Breakup of
variable o/h is 50%on manufacturing, 30% on
administration and remaining on sales.
4. closing raw material inventory to be planned for 1200 units.
5. Raw material prices are expected to go up by 10% in 2011.
6. Inventory valued on a FIFO basis.
7. 50% of raw material purchases and sales will be on credit of which 90%
will be settled in 2011 itself.
8. Debtors and Creditors as of 2010 will be settled in Jan 2011.
9. Company charges depreciation at 10% per annum on SLM basis. All
assets were purchased 5 years ago.
10.
Company will write off 50% of the preliminary expenses & will pay
off 75% of the outstanding expenses of 2010.
11.
The tax liability expected for 2011 is Rs. 1,72,740/- which will be
paid in 2012.

12.
Estimated Fixed cost (excluding depreciation) will be Rs. 75,000/with a break up of 60% on production, 20% on admin and remaining on
sales.
13.
Additional issuance of 5000 equity shares of Rs. 10/- each at a
premium of Rs. 20/- per share during 2011.
14.
Company will declare an equity dividend of 8% on enhanced Equity
capital
Prepare the master budget for 2011 along with the budgeted cash flow
statement.

ANSWER

Budgeted Profit & Loss

31/12/2011

Account for the period 01/01/2011 to

EXPENSES
Raw Materials used in production
:Opening Stock 100 units
(From purchases less closing
stock) 1100 units @ Rs. 22/-

INCOME
Sales (12,000 units)
20,000
- Cash
2,42,000
- Credit
( Rs. 140 /Unit -1.5
%discount)

Wages
Variable
Manufacturing
overheads
Variable Admin overheads
Variable sales overheads

3,60,000
1,20,000

Preliminary Expense Written off

Fixed overheads
Production
Admin
Sales

Rs.

72,000
48,000
10,000
45,000
15,000
15,000

Depreciation@ 10% SLM

Building
Plant
Furniture

20,000
40,000
30,000

Interest on debentures
8% Dividend on Equity Shares

42,000
12,000

Rs.
8,27,400
8,27,400

9% Dividend on Pref. Shares

Provision For Tax

18,000
1,72,740

Retained
Figure)

3,73,060

Earning

(Balancing

16,54,80
0

16,54,8
00

Budgeted Balance Sheet as on 31/12/2011

Liabilities
Equity Share Capital
Old (Rs 10/- face
value)
New Issue (5000
Shares)
Share Premium
General Reserve
carried
Retained Earnings
(P/L)
R&S
9%Preference Shares

Rs.

Assets

1,
Building
00,000
Less: Deprecation
1,50,000
50,000

Rs.

1,00,0
00
(20,00
0)

1,00,00
0
60,000
Plant
3,73,06
Less: Depreciation
0
5,33,060
5,33,06
0

2,00,0
00
(40,00
0)

Furniture
2,00,000
Less: Deprecation

1,50,0
00
(30,00
0)

80,000

1,60,000

1,20,000

Raw material Stock

3,00,000 (1200 Units
@Rs.22/-)

14% Debentures
Creditors
Outstanding expenses
Less: paid
Out standing
expenses

13,420
20,000
(15,000
)
5,000

Provision For Tax

Prov. for Div on eq.
shares
Prov. for Div. on pref.
shares

Receivables

Preliminary
Expenses
5,000 Less: Written Off
1,72,740

26,400
82,740
20,000
(10,00
0)

Cash (balancing
figure

10,000
9,25,080

12,000
18,000
14,04,22
0

14,04,22
0

Budgeted Cash Flow for the Period (1.1.2011 31.12.2011)

Cash Inflows
Opening cash Balance

Cash Sales
90% of Credit Sales

Rs.

Cash Outflows

1,80,000 R/M purchase (12,200 units @

Rs 22 per unit)
Cash
90% of Credit Purchase
8,27,400 Wages
7,44,660 Variable
Manufacturing
overheads

Rs.

1,34,200
1,20,780
3,60,000
1,20,000

Liquidation of Debtors
2010
New Equity Shares
(5000 x Rs. 30)

50,000 Variable
Administration
overheads
Variable Sales overheads
1,50,000
Payment to Creditors of 2010
Fixed Production Overheads
Fixed Admin overheads
Fixed Sales overheads
Payment of 75%
of O/s
expenses
Interest on Debentures
Cash
Figure)
19,52,0
60

Balance

(Balancing

72,000
48,000
40,000
45,000
15,000
15,000
15,000
42,000
9,25,080
19,52,0
60

Problem no. 16:

Prepare a cash budget for the 3 month period July ~ September 2012, showing
the extent of borrowing required (if any) :-

Estimated sales: July

4000 units
August
5000 units
September
5000 units
October
6000 units
All sales are made on credit basis. 50% of the accounts receivables are
collected in the month of sale; 25% are collected in the second month and the
balance 25% in the third month.
Sales for:

June
May

3800 units
3600 units

Unit selling price was Rs. 200 per unit. Raw Materials are required for
production in the month proceeding the month of sale. The Delivery period of
materials is negligible. 25% of the cost of
materials are to be paid at the time of receipt of the material and the balance
in the next month . Raw material cost is 30% of sales. Cost of goods sold
(exclusive of Depreciation) is estimated to be 70% of sales. All other Expenses
are to be paid in the month of manufacture itself. Annual depreciation is Rs.
24,000 which is uniformly charged off at Rs. 2,000 per month in the profit and
loss account. Capital Expenditure of Rs. 4,00,000/- is estimated in the month of
august. The company's policy is to maintain a minimum cash balance of Rs.
50,000. The company had an opening cash balance of Rs. 5,000 In the month
of July.