InvestmentRequired for seting up a business

Investmentin Fined Asset.

Plantproperties Equipments

x
W
-
v

Raw material Material in Finished stock in Receivable

8
wase houses
outstanding.

Investmentin
working cap.

Components
of working Capital.
All CassentAssets
liabilities.
Cussent
necessary for
->

Businen

Net
financed by
10.
necessary Asst
Cassant

100 stock.

(editor-
80 20
100 -
20: do

FA+ CA-CL

FASSet + W.Zap.
Oli
Fined Asset: 60,000

Aug Stock -
Rm 20,000
-

WIP 10,000
-

FY 12,00057000 S

-
Rec 15,000 (10,000) (edito

47008 I

60,000 47,000:107,000
+

locapital -> Investment

↳ Return
Disect X

Raw Material

Pusch.
↳ 7
Rm consumed.

R. M.
Consumption:180,00
Days
Rm
Ersumption/day:180,000/360
=1500
Rm
holding policy: Soday
Rimbalance 500x60dep
=

Rmaterial:Re:30,000

19) RM balance
Rm
policy day.:Ang
consumed
x Rm
360

4) Policy day
Assumed 360dy:RmPoe X
Balance (R. Material) 180,000 x 30,000
Goday
=
-

360

dy= Goday.
R.M:
Policy Day 30,000
180,008
x
360

01
Rinconsumption R:240,000
=

Rybalance:Re:42,000
Avesage
InterestTate 20%
=

-> S. is
considering
reduce
to Rm 7.0.
day by 5
day.
Required: -

Saving due
change
to in
policy.
Solution

AU8RM
R.M 7.0
days- R.M consumed
x360

42,000
-

240,000
x 360 63=

day,

days
58
policy days:
New

R:
Ang balancein 240,000
New x
58dy 38,667
:
.

360

Previously Now

Any RM 42,000 38,667

Ints. Cost (20%) &400 7733

/

/Savings. R:667

OK Data
for 2019
Plans for
2020

Sal R:600,000
R.M balance Re:24,000 Sale 25%4

4.p% 40%
of Sale. R.mday. 32
days.
intesat 20%
D.M consumption:60% of logs.
=
 Required
is Additional RM Required

27 Add. Fin Cost

Solution

Sale. 600,000 x 1.25 750,000

60%

Cogs(60%) 360,000 x 1.25 950,000

60%
RM consumption 216,000 x 1.25 270,000
(60%
of cog)
Rm balance 24,000
↳ x) s0
216

yody.
24,000

RM Consumed
360
New
x
policy day.

270,000 32:24,000
x
360

2 work in
Process (WIP)

production time =

zoday.
·Jan

7 > 205a

22 215.

20
day
of good
cost

Cost Manufactured.
of Goods,120,000
many
Daily production:420,000 =
360 =
1111.11

Ang wip:1111.11 x 20: 122,222

 Balance
Aug Cost
of Goods Many x klp day:Anybrist

Day. (Psduction time).

Average days:WIp-dy-
WIP
x 360

Cog
m.

Oll
Data
for 2021 Data
for
2022

C09m(2021) R: 1,500,000 4
Production 30%.

Due improved
Arg wip balance:Rs. 62,500 to
technology
production day reduced

by 4
day
Ints. Cost: 20%

Required
·
Additional WIPrequired

Saving
2012
of
·

Solution

WIP Days: Aug WIP 360

x

cogni
62,500
1,500,000
360:
x
15
day

Next years. 2022

WIP
Day:
11 (15-4)
Cogm nent
4... 1,500,000 x 1.3

1 1950,000

Wip Balance: 1950,000 360 x

= 11

1Rs:59.583
 Comparison
2021 2022

Aug Wip. 62,500 59,583

Iuts. Cost 12,500 11,917

Savings. IRs:
=
583

Fixed
Goods

Y3 wasshous be cost
of goods sold.
ManyGord
X

Cost Sold:2,000,000
of Good

Policy you FG
Days:45day.
"

2,000,000 45
x

days
250,0
-

Days (Fy Days -

Holding period)
x360day:Any
Fu.
Day
Argte
in

He AresageBalance.
cog; x
policy Any
day:
F

(FGDays)
Oll 2021
2022
Sale 3,200,000
36%
4.4% 40%
is sale income
by

Fuguinceausodeal
2)
FG
Days. 36
day e
 2021 2022

cogs 1,920,000 New Sale. 3,200,000 x 1.36

4,352,000
F4StOCK:1920,000 x36

Cog 4.352,000
360 =
x 60%
FGStOCK R:192,000
=

2611,200
Cog :

Policy:45days.
2611200
Argty: 360
x 45

Additional
in
Investment Fybal=326,400
F.G. Rs:134,400
=

RM
Ire Consumed
WIP 9
Cogn
Fu
cost of goodscold

(4) Receivables

Credit period D C
=

to ay: Centomness
by
allowed
settle
to
The is dun.

esedit Sale:7,200,000

Days(edit
allowed:45
days.
period

Aug Bestors.

7,200,000 =
360 x 45

Any Destos 900,000

=

Debtor,
Day. Average Debtoss 360
x v
<Sedit Sale
 Destrss Bal

CreditSalexPolicy day
Leditperiod

Oll 2019
sal:4.536,000
Credit
CMY I
25%

(edit
period allowed 30 =

days.
2020

Credit
period is serised to 42
days.
·

Sal Yed 20%

·

by
Working Capital 16%
Lit =

Eg: Evaluate
Change
in (edit period.

Solution

Debtoss:4536,000
Arg 360
30
x
2019

Debtors Bal= 378,000

Sala (New) 4536,000 x 1.2 5,443,200

=

AngDabtos, 5,443,200 =
360x42

635,040
Aug Destros.
Evaluation

Additional Sale.
Re: 907,200
(5,443,200 4536,000)
-

Additional (M 25% 226,800

Add. WC. Colt

(635,040 -370,000)
257,040 x16% (41,126)
Add.
Pogit 185,674
⑤
(seditors.

Days allowed
by our
suppliesbefore
Payment for R.M.

(editpuschases:1729,000
allowed:38
days.
Isedit period

1,720,000:360 182,400 =

(editors
Day.
Average
Isadit
(editors
x 360
purchase

(editors Balance

Credit purchases.
(editperiod
x
360 allowed.

Ol
45000

Egg So
dap.
intesent:20%
Incentive.

days.
20
By
Co.
pays
in

it
will a discout of
21 on all
getpurchase
solution

Ledit purchases. 45,000

x 30:
360

(edit purchases:540,000

Evaluation

Discount= 540,000 x 2% =
110,000
(edit Purchase 540,000 98%
x

529,200

Aug (editors (New):529,200

360
x 20
days:29,400
Reduction (n
(editors 45,000-29,400:15600
=
 Ints. Lost15600 20%:
x (3,120)
Discount I 10,000
Net
Benefit:7,600

Summary
is Raw material.

R.M consumed Rm
Balance
360
x
day.
Rm
Day =
Aug x 360
R.M Consumed

2) WIP

Cost
Balance
- of
Goods ManuyxIIDay,

Days Aug,
wg
-> x 360

37 Finished Goods.
Cost sold
Balank:
of Goods
368
x
FGDay,
Day. An F.
4.x 360

ogs
4) Debtoss

Balance:CreditSale.
x
(sedit period
360

Days (sedit period:Ang L.

Debtoss
Sale
X 360

57 (saditoss

Credit
Balance: purchase. x
Isedit
period
360 allowed

Supplies,
by
Days= Aug (editors
368
x
(edit pusch
wo.Cap. cycle
Investment in

RM refused.
Days.
x + XX is
no.cap,
WIP
D x xx
x

ays
Fy Day
x xx
x

Debtors
Day
x x xx

Creditos, (x x x)
Days
x

W.C. x xxx
cycle.
wo.
Capital. Balance.

R.M Balance x +x4

IIP Balance xxx

FG Balance x xx
x

Debtors Balance. x
+ xx

[editors Balance (xxxx)

Investment XX +
Working Capital.
in X
-

It
I
V
W

is Raw Material

Days:(45,000 50,600) 2
+ =

360
x

670,000

R.M
Days:26 days
27 WIP
(36,000 62,000) +
2
=
x360
1260,000

wip
days:14 day.
3) Finished Goods.
Finished Good.

op. 60,000
cogs 1,240,000
Cogm 1,260,000

C1. 80,000

FyDays:160,0001240,000
90,000) 2
+ =

360
x

Fy
Days.
21
days.
=

4)Receivables

Days:170,000 85,000) 2
+
=

360
x

1,600,000

Credit
Period
I
17
days.
[editors
5

Raw Material.
op 45,000
Rm consumed. 670,000
Pusch. 675,600

Cl. 50,608

(editor. (40,000 46,000)

Day
+ 2
=
360
x
675,600

(edit
day
period =23
allowed

by supplies,

Working Capital
cycle.

Ron
26
WIP
ye 14
21
Receive bag.
D
17
(23)
Dayable ays.
W.cap. Cycle. 55day
 Fusitis Concepts.
is
Sale 150,000

psojit 20%

Dividend
policy 75% ofDividend.
-
dists; butt

Solution

Profit 150,000
=
x 20% 30,000
=

Dividend 70% (21,000)

Retained Funch. 9,000-

ii) Required
CA
for Additional Sala.

Factory.
I
Kasachi Lahose.

RM: 25,000
v

10,000 15,000
-
sale 87,758
(edit Cash.

2 A. 127,000
WIP 12,000

!
CL

Fi 40,000 v

Receivable 50,000
127,000 =87,755

Annual Sah. 87,7500

every years.
CA:144.73%
CL 11. 4% v

CA =
127,000
CL: (10,000)
117,000 v
 04 :
sal
for years
it 120,000

CA Required 150%0f sale V

IL be created 20% Sala

of
to W

psojit %.
Dividend
25%v

60%
v

payout
Raguised
to be
funds required
Calculate
outside the 10.
generated from
to support Sale.
Funds Required Funds available

CA (120 x150%) 180,000 Sale 120,000

(120K x20%) (24,000) (25%)
CL
Psojit
Dividend (60%)
30,000
(10,000)
156,000
Retained
funds 12,000

Funds Required 156,000

Fouch internal (12,000)
Find to be
generated 144,000
from outside Co.

iii) Fund bs.

from Existing

Enistig New

Kasachi Lahose.

Sale. 500,000 Sate 250,000 (New).

psojit
20%w
Profit 20% -

Dividend boy Dividend 60%

Re
CA sah 150%
CL u sah 20% -

Funds Required Funds available

(250,000 x 150%)
CA 375,000 sah. 750,000

00y Psojit
( (250,000 x 20%) 150,000
Find Required Dividend (90,000)
Internal Funch. 60,000
available.
 Funch Required 325,000
Internal available 160,000
Funch Rep. Joom 265,000
out
side Co.

Oll Re:
Sah
Joz 2019 5,000 v

40%
Next
teas incare

30%
psofit
Dividend 70%
payout
working cap. Per add. Sale.
Jo
CA 150% additional Sala
of
v

CL 40%.. V

Required Fonch Reg. from outside to.

Funds Required. Funds available

Sala. 5000 x 40%:2000 Sak (old + additional) 7000

5,000 x 1.4
CA (2,000 x 150%) 3,000
CL (2,000 x40%) (800) profit (30%) 2100

site
Funds Required. Dividend (70%)
2,200
Retained Fuch "
Funch
Jos. w.cap you add. Sah. 2200
S

Internal Funch. available (630)

Enternal Funch Required 1,570
-
Oll
Sale Last
years. 10,500
for =

10%
Pojit% 1

20%
Dividend ditsib.:

Next
years. w

Increase in sale.(NextYeas) 25%

Additional Stock Required dry of incremental sal

Additional Receivable Sale.

60%
of increased
Payable 40%
Additional
of increased sale.
Required
Internal Funds required.

Funds Required Funds available

Add. Sake 10,500x25% 2.625 Sale. 10500 x 1.25 13,123

CA (2,625 140%)
Ch(2625 40%)
x

x
3,675
(10507
I
Poojit (10%)
Divided (20%)
1,313
(263)
Finch Reg. 2,625 Internal Fuch 1050

Funch Required 2625

Internal Fuch (1050)
Fund deguised from 1,5.75
External Sousce.

All
Next Yeas
Existing Sales 5,000
Sal Y
Psojit
Dividend
20%
60%
by 30%

CA:140%
CL
of Incom. Sale
= 300....

Canela) Internal Fouch?

Funds Required Funds available

Incs. Sale. (5000 x30%) 1,500 sal. (5000 x1.3) 6500

↳

1300
CA (1500 x 140%) 2,100 jgt, I

(780)
CL
(1500 30%) x (450) 10
1

Funch Required 1650

I

Funch available (520)

Ent
Fach Reg. 1,130
-
 Funds Required Funds available

CA (5000xx,x140%70002 5000x (1+ 41) 200

x 40%
x

CL(5000xx.x30%) (1500k)
400 (1+ x.x)
15500K
1400 +
4002

55002 400+ 4002

=

55002-4002:400

5100k 400 =

2 400:5100
=

(n 7.843%
=

Funds Required Funds available

5000x7.843%392.16 5000x(1+ 7.043%) 5392-15

(A (392.16 x 1.4) 549.02 P--jit (20%) 1076.43

<
(392.16 x30%) (117.64) Dud (60%) (647-06)
431.37 431.37
-
Working Capital Management

R.M TO

Augu
Day.: Rm consumed
360
x
/Goday.
=

Time: 360/60:6 time.

Roconsumed time he

Day Highes
e
- The
day longes the
money
would be stuck and as

a result
higher
the
bin. Cost

>Should be low

"Time"should be
high-
R:10,000
Rm
Ord
150,000
=

Ra
Coud"
80,000 ⑮
① ⑦ ③

--

stom

temporasy-
v
Permanati
~
~

I -

2
Wlp Toon over

15%in
Day: AugwIP /day.
x360:

Times:360:15:24

9:15
9:00 9:05-9:10 9:20

B Fr
↳1.
A
5 Minute 10 Minutes Minute.
5
 - ~

AugFy
M
-
x360 Day.
=

cog
e n - -

- -
-

10,000
a A 5,00 -60: Time.

·
-

-
-

AugRec x360 days.

:

C
C. Sale

Time
editsah:3e

Arg (editors
x360:
Days body
C. Pusch
Time:(seditpus:

A Lediter It

RM TO
I
WIP TO
Ideal
Days. a

Ra TO Times I

Rec. TO

4
(seditors To
&Day
Timesto
 -

liquidity =

Ability
to
payojy
dre.
liabilities
When

Y I
12

2
come
a re

C. lial.

w
I ↑ I I
D -
12
(Asst

Cussent(A 120:1.33
2

Ratio
In

CL 90

·
Balbal.-
· Carh-

· AlcRec -

·
term
Short incar-

R
Stow

LiquidityRatio ( Acid Test Ratio

Ca-Stock.
CL I'll