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9920400029
NAVIGATOR TUTORIALS
FM
PAPER 1
NOTE:
1. All questions are Compulsory.
2. All questions carry equal marks.
3. Illustrate your answers with suitable examples.
4. Show all your workings and state assumptions clearly.
5. Working Note shall form part of answers.
1. Attempt any two:
a) The following forecasts have been made for ABC Ltd. For the period January to April 2001.
Particulars
January
February
March
April
Sales
75,000
1,05,000
1,80,000
1,05,000
Raw Materials
70,000
1,00,000
80,000
85,000
Manufacturing Expenses
10,000
20,000
29,000
16,000
Loan Installment
1,000
11,000
21,000
21,000
Additional Information:
i) All sales are made on credit basis. 2/3 of debtors are collected in the same month and balance in the next
month. There is no expected bad debt. The debtors on January 1, 2001 were Rs. 30,000
ii) The minimum cash balance, the firm must have is estimated to be Rs.5,000 however the cash balance on
January 1 was Rs.6,500.
iii) Borrowing if any, can be made in multiple of Rs.1000 only
Prepare the cash budget for the period of 4 months (ignore interest on borrowing)
b) MTs capital structure consists of the following:
Particulars
Rs.
Equity shares of Rs. 100 each. 20,00,000
Retained earnings
10,00,000
9% preference share capital
12,00,000
7% debenture capital
8,00,000
Total
50,00,000
The company earns 12% on capital. The income tax rate is 50%. The company requires a sum of Rs. 25,00,000 to
finance expansion programme for which the following alternative are available to it.
1. Issue of 20,000 equity shares at a premium of Rs. 25 per share.
2. Issue of 10% preference shares.
3. Issue of 8% debentures.
It is estimated that the P/E ratio in the cases of equity. Preference and debentures financing would be 21.4, 4.17
and 15.7 respectively.
Which of the financing alternatives would you recommend and why?
c) The following are the Balance Sheets as on 31-12-09 of Nisha Ltd. and Usha Ltd.
Usha
Liabilities
Nisha (Rs.) Usha (Rs.) Assets
Nisha (Rs.)
(Rs.)
Equity Capital
Land & Building
70,000
-(Rs.100 per share)
2,00,000
1,20,000 Plant & Machinery
2,20,000 1,00,000
15% Debentures
40,000
-- Stock
35,000
18,000
Reserve Fund
76,000
5,000 Debtors
25,000
16,000
Employees
Bank
6,000
2,000
provident fund
6,000
-- MISC. Exp not W/o
Sundry Creditors
30,000
16,000 Advertisement Exp.
-5,000
Profit & Loss A/c
4,000
-3,56,000
1,41,000
3,56,000 1,41,000
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NAVIGATOR TUTORIALS
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The two companies agree to amalgamate and form a new company M/s. Ujala Ltd. which takes over the assets and
liabilities of both the companies. The authorized capital of Ujala Ltd. is Rs.20,00,000 consisting of 2,00,000 Equity
shares of Rs.10 each. The assets of Nisha Ltd. are taken over at 90% of the book-value with the exception of land
and building which are accepted at book value. Both the companies are to receive 10% of the net valuation of their
respective business as Goodwill. The purchase consideration is to be satisfied by Ujala Ltd. in its fully paid shares at
10% premium. In return of Debentures of Nisha Ltd., Debentures of the same amount and denomination are to be
issued by Ujala Ltd. Calculate Purchase Consideration and show the Opening Balance Sheet of Ujala Ltd. Under
Purchase Method.
2. Attempt any two:
a) Yankee company ltd. has investment opportunity costing Rs. 40,000 with the following expected net cash flow (i.e.
After tax and before depreciation):i.e. CFAT
YEAR NET CASH FLOW (Rs.)
1
7,000
2
7,000
3
7,000
4
7,000
5
7,000
6
8,000
7
10,000
8
15,000
9
10,000
10
4,000
(a)
(b)
(c)
Using10% as the cost capital, determine the net present value at 10% discounting factor,
Determine the profitability index (PI)
Find out the discounted Payback Period.
b) M/S Bharat Industries Ltd. has annual credit sales of Rs. 24 lakhs. Mr. Patil, the newly appointed Sales Manager
has ambitions plans to increase the Sales and also the profitability of the Company.
At present the sales price per unit is Rs.20 and present age of accounts receivable is one month and variable
cost@ 50% and net profit is @ 20%.
Mr. Patil has put forward the following two proposals before the management.
Proposal I: Increase the credit period to debtors from one month to 3 month. The expected sale will be Rs. 30
lakhs. Chances of bad debts @ 2% of the credit sale.
Proposal II: Reduce the Selling Price by 5% per unit. Expected Sales would be Rs.28.50 lakhs. All cash sales no
credit sale.
Assuming that the cost of funds is 12% p.a., and other conditions remaining same, which would you recommend?
c) G. G. Ltd has the following capital structure as on 31st march 2002.
Rs.
Ordinary shares [4,00,000 shares] 80,00,000
10% preference shares
20,00,000
14% debentures
60,00,000
The shares of the company are presently selling at Rs.20 per share.
It is expected that the company will pay next year dividend of Rs.2 per Share which will grow @ 7% forever. Assume
tax rate of 40%. You are required to
II SHREE RAJ II
9920400029
NAVIGATOR TUTORIALS
FM
[I]
Compute the weighted average cost of capital based on existing capital structure.
[II]
If the company raises an additional Rs.40 lakhs debt by issuing 15% debentures, the expected dividend at
year-end will be Rs.3, the market price per share will fall to Rs.15 per share, the Growth rate remaining unchanged.
Calculate the new weighted Average cost of capital.
3. Attempt any two:
a) A factory produces 96,000 units during the year and sells them at Rs.50 per unit. Cost structure of a product is as
follows:
Raw Materials
60%
Labour
15%
Overheads
10%
Total cost
85%
Profit
15%
Selling Price
100%
a)
b)
c)
d)
e)
f)
g)
h)
i)
b) Calculate operating leverage and financial Leverage under situations A, B & C and Financial Plans I, II & III
respectively from the following information relating to the operation and capital structure of Rani Ltd. Also find out
the combination of operating and financial Leverages, which give the highest value and the least value, how are
these calculations useful to finance manager.
Installed Capacity (no. of units)
1200
Actual Production and Sales (no. of units)
800
Selling Price Per Unit (Rs.)
15
Variable Cost Per Unit (Rs.)
10
Fixed Cost Situation A (Rs.)
1000
Fixed Cost Situation B (Rs.)
2000
Fixed Cost Situation C (Rs.)
3000
Financial Plans
I
II
III
Equity (Rs.)
5000
7500
2500
12% Debt (Rs.)
5000
2500
7500
c) Company X is contemplating to purchase Company Y. Company X has 3,00,000 shares having a market price of Rs.
30 per share while Company Y has 2,00,000 shares selling at Rs. 20 per share. The EPS are Rs. 4 and Rs. 2.25 for X
and Y Respectively.Management of both the companies are discussing proposal for exchange of share in proportion
to the relative earning per share of two companies.
Calculate EPS after merger if implemented.
II SHREE RAJ II
9920400029
4.
NAVIGATOR TUTORIALS
FM
5. Tata Steel-Corus is toying with the idea of replacing its existing machine. The following are the relevant data:Existing Machine:
Purchased 2 years ago
Remaining life 6 years
Salvage value Rs. 500
Depreciation on straight line basis
Current Book Value Rs. 2,600 and its realizable market value Rs. 3000
Annual Depreciation Rs. 350
Replacement Machine:
Capital Cost of Rs. 8,000
Estimated useful life 6 years
Estimated Salvage value Rs. 800
The replacement machine would permit an output expansion. As a result, sales is expected to rise by Rs. 1000 per
year, operating expenses would decline by Rs. 1500 per year. It would require an additional inventory of Rs. 2,000
and would cause an increase in accounts payable by Rs. 500.
Assuming a Corporate tax rate of 40% and cost of capital of 15%, advice the company. (Present value of Re.1
receivable annually for 6 years @ 15% = 3.784, PV of Re. 1 receivable at the end of 6 th year @ 15% per annum =
0.432).
II SHREE RAJ II
9920400029
NAVIGATOR TUTORIALS
FM
Paper 2
NOTE:
1. All questions are Compulsory.
2. All questions carry equal marks.
3. Illustrate your answers with suitable examples.
4. Show all your workings and state assumptions clearly.
5. Working Note shall form part of answers.
1. Attempt any two:
a) Prepare monthly forecast of cash for Raja Ltd. For the quarter ended 31st December, 2007 from the following
information :
1. Opening balance as on 1st October 2007 Rs.52,000.
2. The Budgeted and actual sales were Rs.1,s00,000 each for August and September, October Rs. 1,20,000,
November Rs.1,35,000 and December, Rs.1,40,000, 30% sales were for cash and out of the balance, 50% in
subsequent to the month of the sale and 50% in the second month subsequent to the month of the sale.
3. Dividend on investments is being declared on 20th December, 2007 amounting to Rs.1,200.
4. Machinery sale in month of December 2007 Rs.15,000.
5. Materials worth Rs.40,000 each is being purchased in August & September, 50% of which is payable on 1st
October, 2007 and proposed purchases for quarter October to December evenly spread- out is Rs.1,50,000.
Vendors offer 5% discount for cash payments. It is decided to maintain cash balance at Rs.10,000 each month and
the balance to be utilized for payment to vendors.
6. Wages are expected to be Rs.12,000 per month payable a month in arrear.
7. Manufacturing expenses payable in the month incurred Rs.15,000 per month.
8. General Selling expenses are expected to be Rs.5,000 per month.
9. Machine costing Rs.55,000 is proposed to be purchased for cash in December.
b) Mitika Ltd. needs Rs. 12 lakhs for the installation of a new factory which would yield an annual EBIT of Rs. 2,00,000.
The company has the objective of maximizing the earning per share. It is considering the possibility of issuing equity
shares plus raising debt of Rs. 2,00,000, Rs. 6,00,000 or Rs.10,00,000. The current market price per share is Rs. 40
which is expected to drop to Rs. 25 per share if the market borrowings were to exceed Rs. 7,50,000.
Cost of borrowings are indicated as under:
Up to Rs. 2,50,000
10% p.a.
Between Rs. 2,50,001 and Rs. 6,25,000
14% p.a.
Between Rs. 6,25,001 and Rs. 10,00,000
16% p.a.
Assuming a tax rate of 50% workout the EPS and the scheme which would meet the objective of the
management.
c) Hum Ltd. and Tum Ltd. propose to amalgamate and for this purpose New company HumTum Ltd. was formed to
take over assets & liabilities of both the companies. Goodwill may be taken at Rs. 96,000 for Hum Ltd. and Rs.
38,000 for Tum Ltd. The Stock of Hum Ltd. and Tum Ltd. to be taken at Rs. 2,04,000 and Rs. 1,42,000 respectively.
You are required to find out the purchase consideration receivable by both the companies on the basis of the Net
Assets Method. And prepare opening balance sheet of Hum Tum Ltd.
II SHREE RAJ II
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NAVIGATOR TUTORIALS
FM
9,00,000
3,00,000
II SHREE RAJ II
NAVIGATOR TUTORIALS
9920400029
FM
60 %
10 %
20 %
90 %
10 %
100 %
II SHREE RAJ II
9920400029
NAVIGATOR TUTORIALS
FM
II SHREE RAJ II
9920400029
NAVIGATOR TUTORIALS
FM
PAPER 3
NOTE:
1. All questions are Compulsory.
2. All questions carry equal marks.
3. Illustrate your answers with suitable examples.
4. Show all your workings and state assumptions clearly.
5. Working Note shall form part of answers.
1. Attempt any two:
a) Prepare a cash Budget showing bank saving balance separately for three months ended 30 th June, 2009 based on
the following information:
Cash on 1st April 2009
Rs. 15,000
Salaries and Wages Estimated-Monthly Rs. 10,000
Interest Payable-May 2009
Rs. 5,000
Amount in Rupees
Estimated
March
April
May
June
Cash Sales
1,20,000 1,40,000 1,52,000 1,21,000
Credit Sales
1,00,000 80,000
1,40,000 1,20,000
Purchases
1,60,000 1,70,000 2,40,000 1,80,000
Other Expenses 18,000
22,000
32,000
21,000
Credit Sales are collected 50% in the month in which sales are made and 50% in the month following. Collection
from credit sales are subject to 5% discount if payment is received during the month of sales and 2% if
payments is received in the month following Creditors are paid either on prompt or 30 days basis. It is
estimated that 10% creditors are in the prompt category. Other expenses are paid in the month In which they
are incurred. Cash on Hand is not to exceed Rs. 50,000/- at the end of any month. Excess is deposited in bank
saving account on which interest is received quarterly @10%p.a. in a financial year on the balance of the day.
b) A new project under consideration by your company require a capital investment of Rs. 150 Lakhs. The required
funds can be raised either through the sale of equity shares or borrowed from financial institution. Interest on loan
is 15% and tax rate is 50%. If the debt equity ratio insisted by the financial agencies is 2:1. Calculate the point of
indifference for the project.
c) A Ltd. and B Ltd. carrying on similar business decided to amalgamate and for this purpose a new company AB Ltd.
was formed to take over assets and liabilities of both the companies. It is agreed that fully paid shares of Rs.100
each shall be issued by the new Co. to the value of net assets of each of the old companies.
Balance Sheet of A Ltd. as at 31st December 2009
Liabilities
Rs.
Assets
Rs.
Shares of Rs.50 each 50,000 Goodwill
5,000
General Reserve
20,000 Land & Buildings
17,000
Profit & Loss A/c
3,000 Plant & Machinery 24,000
Sundry Creditors
4,000 Stock
10,000
Bills Payable
4,000 Debtors
12,000
Furniture & Fittings 5,000
Cash at Bank
8,000
81,000
81,000
Balance Sheet of B Ltd. as at 31st December 2009
Liabilities
Rs. Assets
Rs.
II SHREE RAJ II
9920400029
NAVIGATOR TUTORIALS
FM
b) Sincere Textile manufactures two products A and B. Information about these products are furnished as follows:
Particular
Product A
Product B
Price
1.10
2.10
Cost of Sales
0.50
1.20
Spare Capacity
40,000 units
30,000 units
Presently the firm sells on cash basis. Management is interested in knowing it the extension of credit facilities will
be of any used. Management desires that the following credit policies be evaluated.
Policy I No discount; 1 month credit period; estimated increase in sales; product A 30,000 units, product B 20,000
units
Policy II No discount; 2 month credit period; estimated increase in sales; product A 30,000 units, product B 40,000
units
Evaluate the two credit policies keeping in view cost of finance as 10%.
II SHREE RAJ II
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NAVIGATOR TUTORIALS
FM
c) For varying levels of debt-equity mix, the estimates of cost of debt and equity are given below :Debt as percentage of Cost of Debt (%) Cost of Equity (%)
Total Capital Employed
(After Tax)
0
6.0
13
20
6.5
13.5
40
7.0
15
60
8.0
21
You are required to determine the OPTIMAL DEBT-EQUITY mix for the company by calculating the composite
cost of capital
3. Attempt any two:
a) From the following information prepare an estimate of working capital required to finance a level of activity of
3,12,000 units p. a (52 weeks) and how will you finance the working capital.
Particulars
Per unit(Rs.)
Raw Materials
90
Wages
40
Overheads
Manufacturing
30
Administrative
10
Selling
10
210
Profit
40
Selling price
250
Other information:
a. Raw materials are held in stock for a period of 4 weeks.
b. Materials remain in process for 2 weeks requiring 50% wages and 40% overheads.
c. Finished goods remain in the stock for a period of 4 weeks.
d. Credit allowed to customers is 8 weeks but 20% of the invoice price is collected immediately.
e. Time lag in payment of wages is 1.5 weeks and overheads is 4 weeks.
f. Credit available from suppliers is 4 week but 20% of the creditors are paid 4 weeks in advance.
g. Bank balance is to be maintained at Rs.60,000.
j) KT industries manufactures one product with selling price is Rs.20 per unit and the variable cost is Rs 10 p.u. The
plant has a installed capacity of 2,000 units, but the utilization is only 50%. Fixed cost Rs.5,000.
Its capital needs Rs.20,000. It considers following debt equity ratios:
a. Debt 25%- Equity 75%
b. Debt 50%- Equity 50%
c. Debt 75%- Equity 25%
The cost of debt is 10%. Face value Rs.10. Tax rate 50%.
You are required to calculate all leverages (viz. financial, operating and combined leverages) and suggest capital
structure.
k) ABC Ltd. is considering merger with XYZ Ltd. there are no gains from the merging. Complete the following table in
ABC wishes an EPS of Rs.2.80 after the merger.
Particulars
ABC Ltd.
XYZ Ltd.
Merger Entity
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9920400029
Earnings After Tax
Outstanding Shares
EPS (Rs.)
P/E Ratio
Market price
Total Market Value
(a)
(b)
(c)
NAVIGATOR TUTORIALS
Rs.0.1 millions
50,000
2
10
Rs.20
Rs.10,00,000
0.25 millions
1,00,000
2.5
5
Rs.12.5
Rs.12,50,000
FM
?
?
2.8
?
?
?
II SHREE RAJ II
9920400029
NAVIGATOR TUTORIALS
FM
PAPER 4
NOTE:
1. All questions are Compulsory.
2. All questions carry equal marks.
3. Illustrate your answers with suitable examples.
4. Show all your workings and state assumptions clearly.
5. Working Note shall form part of answers.
1. a) A company is contemplating to purchase a machine. Two machines A & B are available, each costing Rs.5 lakhs. In
comparing the profitability of the machines, a discounting rate of 10 % is to be used and machine is to be written of
in 5 years by straight line method of depreciation with nil residual value. Cash inflows after tax are expected as
follows.
(Rs. in lakhs)
YEAR MACHINE A MACHINE B
1
1.5
0.5
2
2.0
1.5
3
2.5
2.0
4
1.5
3.0
5
1.0
2.0
Indicate which machine would be profitable using the following methods of RANKING investment proposals:
a) Payback period
b) Net present value method and
c) Average rate of return method
d) Benefit cost ratio (PI)
b) A Company Meenu Ltd. has issued 10% debentures of face value Rs. 100 each which are redeemable at par after 10
years. Assuming that tax rate applicable is 40% and the floatation cost of debentures is 5%,
Calculate the Cost of debentures for the company.
OR
p) Asha Ltd. is considering two mutually exclusive machines. Both require an initial outlay of Rs. 1,00,000 each and
have a life of 5 years. The companys required rate of return is 10% and tax is 50%. The projects will be depreciated
on a straight line basis. The net cash flows before taxes are expected to be generated by the projects as follows
Year Machine A (Rs.) Machine B (Rs.)
1
40000
60000
2
40000
30000
3
40000
20000
4
40000
50000
5
40000
50000
Calculate and state which machine should be purchased and why?
(a) Pay back period
(c) Profitability Index
(b) Pay back profitability
(d) Net Present Value
q) East Company Ltd. is studying the possible
available in respect of the companies.
Particulars
East Co. Ltd.
Earning after Tax (Rs.)
2,00,000
Number of Equity Shares
40,000
Market value per Share (Rs.) 15
acquisition of West Co. Ltd by way of merger. The following data are
West Co. Ltd.
60,000
10,000
12
(a) If the mergers goes through by exchange of equity share and the exchange ratio is based on the current market
price. What is the new EPS for East Co. Ltd.?
(b) West Co. Ltd. wants to be sure that the earnings available to its shareholders will not be diminished by the
merger. What should be the exchange ratio in that case?
II SHREE RAJ II
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2. a) Present Situation :
Sales = Rs. 50 lacs
Variable Costs = Rs. 40 lacs
Fixed Costs = Rs. 6 lacs
Credit to Debtors = 30 days
Proposed Credit Policy Proposed Credit Period Sales (Rs. in lacs)
I
45 days
56
II
60 days
60
III
75 days
62
IV
90 days
63
Determine the credit period that should be allowed by the company. Present your answer in a tabular form.
Assume 360 days a year. Calculations should be made up to two digits after decimal. The company expects pre-tax
return on investment @25%.
b) M/s. Monica Enterprises believes in Net Operating Income Approach. Its Capital Structure has following
parameters:
Overall cost of capital
16%
Cost of debt
14%
Market Value of debts
300 Lakhs
Value of equity
260 Lakhs
Calculate:
1) Cost of equity at current level.
2) If cost of debt is reduced by 2% what will be cost of equity if the overall cost remains unchanged.
3) If bonus shares are issued in the ratio of 1:1 and overall cost gets reduced to 15%.
4) If debt-equity ratio is adjusted to 1.8 in current situation, then what will be cost of equity?
OR
p) XYZ Corporation is considering relaxing its present credit policy and is in the process of evaluating two proposed
policies. Currently, the firm has annual credit sales of Rs 50 lakhs and accounts receivable turnover ratio of 4 times
a year. The current level of loss due to bad debts is Rs.1, 50,000. The firm is required to give return of 25% on the
investment in new accounts receivable. The companys variable costs are 70% of selling price. Given the following
information, which is better option?
Particulars
Present policy
Option-I
Option-II
50,00,000
60,00,000 67,50,000
4 times
1,50,000
3 times
3,00,000
2.4 times
4,50,000
q) Company X wishes to takeover Company Y , The Financial details of the two companies are as under :
Company X Company Y
Rs.
Rs.
Equity Shares (Rs. 10 per share)
1, 00,000
50, 000
Security Premium Account
-2, 000
Profit & Loss Account
38, 000
4, 000
Preference Shares
20, 000
-10% Debentures
15, 000
5, 000
1, 73,000
61, 000
Fixed Assets
1, 22,000
35, 000
Net Current Assets
51, 000
26, 000
1, 73,000
61, 000
Maintainable Annual Profit (after tax)
for Equity Shareholders
24, 000
15, 000
Market Price per Equity Share
24
27
Price Earning Ratio
10
9
What offer do you think Company X could make to Company Y in terms of exchange ratio, based on
II SHREE RAJ II
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(i) Net asset value; (ii) Earning per share; and (iii) Market price per share ? Which method would you prefer from
Company Xs point of view?
3. a) Vineeth & Co. Is going to produce and sell 5,000 units per month in the year 2013. The material required per unit is
Rs.55 Direct labour cost Rs.1, 20, 000 per month. The overhead expenses amounted to Rs.12, 60, 000 p.a. The sale
price is fixed by calculating profit at 20% on sale price. Calculate requirement of working capital for 2013 by taking
into consideration the following informationa) Stock of raw material will be two months
b) Process time is one month
c) Stock of finished goods will be 1.5 months
d) Credit allowed to 50% customers is two months and the balance 50% customers are given one month credit
e) 25% of expenses are paid one month in advance and the balance 75% is paid after one month
f) Time lag in Payment of wages is one month
g) 20% of material is purchased on cash basis and 80% material on 1.5 months credit
h) Cash required is 20% of net working capital.
b) The following details for company A and B are given. You are required to compute the sales and then comment on
the profitability of both the companies.
A
B
Operating Leverage 4
4.5
Combined Leverage 8
11.25
9% Debentures
100000 120000
PV Ratio
20%
25%
Tax rate
50%
50%
OR
p) A factory produces 96,000 units during the year and sells them at Rs.50 per unit. Cost structure of a product is as
follows:
Raw Materials 60%
Labour
15%
Overheads
10%
Total cost
85%
Profit
15%
Selling Price
100%
The following additional information is available:
l) The activities of purchasing, producing and selling occur evenly throughout the year.
m) Raw Materials equivalent to 1 months supply is stored in the godown.
n) The production process takes one month
o) Finished goods equal to three months production are carried in stock
p) Debtors get 2 months credit
q) Creditors allow 1 months credit.
r) Time lag in payment of wages and overheads is month.
s) Cash and bank balance is to be maintained at 10% of the working capital.
t) 10% of the sales are made at 10% above the normal selling price.
q) Alpha Ltd. is producing articles mostly on hand labour and is considering replacing it by a new machine. There are
two alternatives Models P & Q of the new machine. Prepare statement of profitability showing the payback period
from the following information:
Particulars
Machine P Machine Q
Estimated life of machine
4 years
5 years
Cost of machine
Estimated Savings in Scrap
9,000
500
18,000
800
6,000
800
8,000
1,000
1,200
1,800
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30,000
52,000
50,000
75,000
90,000
35,000
25,000
3,000
3,500
35,000
4,000
14,000
3,000
3,000
The other expenses per month are Rent Rs. 1,000 Depreciation: 1000 Misc. Expenses Rs. 500 and Commission 1 % of
sales.Out of the sales, 80% is on credit and 20% for cash. 70% of the credit sales are collected in one month and the
balance in two months. Debtors on March 31, 2000 represent Rs. 6,000 in respect of sales of February and Rs. 20,000 in
respect of sales of March. There are no debts losses. Gross profit on sales on an average is 30%. Purchases equal to the
next months sales are made every month and they are paid during the month in which they are made. The firm
maintains a minimum cash balance of Rs. 10,000. Cash deficiencies are made up bank loans which are repaid at the
earliest available opportunity and cash in excess of Rs. 15,000 is invested in securities (Interest on bank loans and
securities is to be ignored) Outstanding liabilities remain unchanged.