15 MARKS CASE STUDY FOR FINAL EXAM

Liabilities Capital Gen. Reserves Other free Reserves Debentures Term loans Other TL Bank OD Sundry Creditors Other short term loans Other Current liabilities TOTAL 2000-01 36.00 41.00 22.00 22.00 25.00 28.00 40.00 39.00 22.00 26.00 301.00 2001-02 Assets 39.00 Fixed Assets 42.00 Investment In subsidiaries 24.00 Deposits with Govt 22.00 Bills receivable 24.00 Bank Deposits 30.00 Raw Material 60.00 Finished Goods 46.00 Cash & BB 23.00 Quoted investments 25.00 335.00 2000-01 45.00 22.00 21.00 66.00 25.00 36.00 33.00 28.00 25.00 2001-02 69.00 21.00 22.00 70.00 24.00 40.00 38.00 30.00 21.00

301.00

335.00

Additional information Particulars Gross Sales Credit Sales Purchases Raw material consumed Cost of Production Cost of Sales Financial Expenses 2001 250.00 100% 150.00 110.00 160.00 175.00 10.00 2002 400.00 100% 260.00 210.00 290.00 310.00 15.00

Rs. lacs 2003 450.00 100% 320.00 260.00 350.00 360.00 20.00

Calculate working capital under NAYAK committee and TANDON II method for 2001, 2002 and 2003

PROFORMA ANSWERS FOR CASE STUDIES

Working capital II method ( Inventory Method / Tandon Method)

Current Assets ; Cash Bank Balance Deposits in Banks Xxx Xxxx Xxx Xxx Misc Current Assets

Inventory Raw material Work in Process Finished Goods Stores and Spares

Debtors Sundry Debtors

Book Debts Bills Receivables

(A) TOTAL CURRENTS

XXXXX

CA

Less Current Liabilities other than Bank Borrowings

Note : While considering Current liabilities Other than Bank Borrowings NO Bank OD / CC should be included .It is purely other Current Liabilities. If Bank Borrowings also included then it will be total current liabilities and the answer will be NWC and not Working capital GAP Sundry Creditors Bills Payable Provisions Xxxx Xxxx Xxxx

(B) TOTAL CURRENT LIABILITES XXXXX CL

(C) A- B WORKING CAPITAL GAP

WCG

(D) Minimum Required NWC i.e 25% of (A) i.e CA

* (E) Actual / projected NWC i.e From the previous year Balance sheet / current year TOTAL CURRENT ASSETS less TOTAL CURRENT LIABILITES

(F) C D or C E which ever is less is the MPBF * Note : Suppose you are calculating working capital for the year 2008 , then balance sheet of 2007 should also be used and NWC should be worked out from the year 2007. The logic is it is expected that the customer will maintain at least previous years (2007) NWC. * It is possible that the customer might have projected in the current year (2008) more than the previous year (2007) and also more than 25% of current year (2008) requirement. In that case the current year (2008) NWC should be taken as (E) .

Example : 2006 Total Current Assets Current Liabilities Other than BB WCG 25% of CA 50 20 30 12.5 2007 60 25 35 15 2008 80 30 50 20

Now imagine that the actual NWC as on 2007 is 25 then for the year 2008 you should take 25 as Actual NWC

But there is a possibility that the customer might have projected 30 as NWC for the year 2008. i.e he is willing to give more than previous year i.e 2007 Since the customer is willing to provide more than what is minimum required we should consider only the projected NWC of 30 as the customer is willing to give

Which means while insisting the customer to provide Margin (NWC) we will verify whether to consider 1. Minimum as per rules 2. Previous year Actual NWC 3. Current year proposed NWC

Of three above which ever is higher. It means we insist the customer to give more margin (NWC) money

NOTE :

To build

Raw Material Raw material consumed is the basis Work in- Process Cost of Production Finished Goods Cost of Sales Debtors Gross Sales Other Current Assets Financial Expenses