PROBLEM NO. 1

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

Balance Sheet as on March 2012

Liabilities Rs. in Lacs Assets Rs. in Lacs

ESC 2.00 NFA 4.00R & S 1.75LT Debt 4.00 Current AssetsComm. Bank Borrowings 2.10 Inventory 5.20OCL 2.15 Receivables 1.60

Cash 1.2012.00 12.00

Income Statement for the year ended March 2012

Rs. in Lacs

Net sales (Cr.) 15.00

Less: cost of goods sold 9.00 Profit 6.00Less: other operating expenses 4.50Operating profit 1.50Non-operating Income 0.20PBIT 1.70Less: Interest 0.60PBT 1.10Less: Tax 0.50PAT 0.60

The industry averages of certain important ratios in which XYZ Limited operates are as follows:

Current Ratio 2Total debt to equity 1.8Total asset turnover 1.4 TimesNet profit margin 4%Return on equity 16.8%Collection period 30 days

Calculate the above ratio’s for XYZ Limited and benchmark its performance.

ANSWER (PROBLEM 1)

Current Ratio = Current Assets Current Liabilities

= Inventory + Cash + ReceivablesOCL + CBB

= 5.2+1.6+1.2 2.15+2.1

= 1.882

Total debt to equity = LT Debt + CBB+OCL Equity+ R &S

= 4+2.1+2.15 = 2.22+1.75

Collection period = Avg. Debtors * 365Cr. Sales

= 1.6*36515

= 38.93 = 39 days

Total asset turnover = Net Sales Total Assets

= 15/12 =1.25

Net profit margin = PAT Sales

= 0.6/15 =0.4

Return on equity = PAT - Pref. DivNet 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 Rs. in Lacs Assets Rs. in LacsCreditors 2.80 Cash 0.70Bills Payable 1.40 Debtors 3.50O/S expenses 0.40 Stocks 4.90Tax payable 1.00 FA 10.50LT Debt 8.40 Goodwill 1.40Redeemable Pref. Equity 2.80Equity 1.40Reserves 2.80Total 21.00 21.00

P & L A/c for the year ended 31/03/2012 Rs. in Lacs Sales Cash 2.8 Credit 11.2 14.00Less: Expenses Factory cost of goods sold 8.4 Selling & Admin 1.4 Depreciation 0.98 Interest 0.42 11.20PBT 2.80 Tax 1.40PAT 1.40 Less: Pref. Div 0.17 Less: Equity Div 0.25Transfer to Surplus 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 payable

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

= 1.625

Acid test = Current AssetsCurrent liabilities

= Cash+ debtors = 0.75Current liabilities

Debtor turnover = Cr Sales Av. Debtor

= 11.2/3.5 = 3.2

Net profit margin = PAT Sales

= 1.4/14

= 0.1

= 10%

Return on shareholder equity = 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 + InterestInterest

= (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 for the Company are as follows:

Current debt / Total debt 0.40Total debt / equity 0.60Fixed asset / equity 0.60Total asset turnover 2.00 TimesInventory Turnover 8.00 Times

Complete the balance sheet given below.

ANSWER:

Liabilities Rs. Assets Rs.

ESC 100000 Fixed Assets 60000Current Debt

24000 Cash 60000

LT Debt 36000 60000 Inventory 40000 100000160000 160000

PROBLEM 4

A Company has the following financial ratios. Complete the Balance Sheet.

Total Debt / net worth 0.5:1Total asset turnover 2 timesGP (PBIDT) 30%Average collection period 40 daysInventory turnover ( at COGS) 3 timesAcid test ratio 0.75

ANSWER:

Assets Rs. Liabilities Rs. Cash 23116 Equity (given) 200000Accounts receivables

164384 R & S (given) 300000

Inventory 350000 Accounts payable 250000FA 212500Total 750000 Total 750000

PROBLEM 5

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

CR = 2.5 times

Debt / equity = 3.5

FA = 350000

14% UTI loan = 7 10% Non-convertible debn. 8

Debtors / Cash = 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 AssetsESC 51429 FA 350000PSC 17142 StockR & S 17142 Debtors10 % Debn 160000 Cash 5952114 % UTI 140000

CLCreditorsB/P 23808

409521 409521

PROBLEM 6

The Balance sheet of X Y Z Limited for 2 consecutive years is given below. Prepare a fund flow statement and your comments thereof.

Liabilities 2011 2012 Diff Assets 2011 2012 Diff

ESC 150 150 0 NFA 550 800 250R & S 250 325 75 Investments 150 100 (50)LTL 250 350 100 Curr. AssetsDebentures 100 175 75 Debtors 250 300 50FD (<1 Yr) 50 25 (25) Inventory 200 225 25CBB 250 225 (25) Cash 100 75 (25)Trade Creditors

200 250 50 0

1250 1500 250 1250 1500 250

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 STUTrade Creditors 50 FD 25From LTU 50 CBB 25

Debtors 50Inventory 25Cash (25)

100 100

LTS LTUTerm Loans 75 NFA 250R & S 100 To STU 50Acc Depreciation 75To STU 50

300 300

PROBLEM 7

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

Liabilities 3/11 3/12 Diff Adj Agg Assets 3/11 3/12 Diff Adj Agg

CBB 146 172 26 - 26 Cash 16 124 108 (8) (50)FD(1<1Yr) 35 40 5 - 5 (150

)Creditors 162 184 22 - 22 Sundry

Debtors40 65 25 - 25

OCL 5 8 3 - 3 Inventory 198 164 (34) - (34)Term Loans 25 40 15 - 15 OCA 45 52 - - 7ESC (Rs.10/- Paid up)

80 200 120 (20) 0 GFA 506 640 134 (25)18

127

(100)

Pre. Exp 0 15 15 - 15

R & S 110 150 40 20 (20)(50)(25)

(5)

Acc Dep 242 266 24 15 39

805 1060 255 805 1060 255

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 company’s 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 STUCBB 26 Cash (50)FD 5 Debtors 25Creditors 22 OCA 7OCL 3 To LTU 108Inventory 34

90 90

LTS LTUTerm Loans 15 Preliminary ExpR & S (20) GFA 15Acc Depreciation 39 127To STS 108

142 142

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 90Direct Labour 40Overheads 75

205Profit 60Selling price 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 StatementSort term uses Short term sources

Raw materials 1080000 Creditors 1080000WIP 885000 O/s wages 180000FG 2460000 O/s OHS 900000Receivables 3936000 MPBF 4155750cash 60000 LTS 2105250Gross working capital 8421000 8421000

PROBLEM 9

Extract of the Balance Sheet of XYZ Ltd is as follows:

(Rs. in Lacs)Year ended March 31 2011 2012

Op. BalRM 91 115WIP 26 27FGs 70 98Rec 48 40Cred 77 59

Cl. StockRM 115 178WIP 27 14FGs 98 135Rec 40 37Cred 59 77

Extract of P & LRM consumption 330 339Depreciation 18 18Excise Duty 53 63Employee Exp 150 173Manufacturing 166 200Non manuf Overheads 12 12Sales (gross) 721 814

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 2011-2012Sales 814Less excise 63Net sales 751RM consumed 339Depreciation 18Employee exp 173Manufacturing exp 200Add : Op WIP 27Less: Cl WIP 14

13

Factory cost available for sale 743

AddOHS 12 12OP FG 98 98 (25)Less Closing FG 135 135Total COGS 718

Item Avg. Value Base No. of Days Weights No. of weighted daysRM 147 339 156 42% 65WIP 21 743 10 91% 9FG 117 718 58 88% 52Receivables 39 814 17 100% 17

142Creditors 68 402 61 49% 30

112Net 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 buy the new equipment? Show your computation using NPV.

Ignore taxation. The min desired rate of return is 12%.

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. Company’s

cost of capital is 12% but wants a minimum return of 14%. Ignore working capital

requirement.

8. Evaluate the investment.

ANSWER

COP18 crores

Discounting factor 14%Gestation factor 1 YrLife of Project 4 Yrs

1 2 3 4Capacity (tones) 20000 20000 20000 20000Production 12000 16000 20000 20000Sales (in Lacs) 1200 1600 2000 2000Less costs RM (50% of sales) 600 800 1000 1000 Utilities (15% of the RM) 90 120 150 150 Salaries & Wages 15 15 15 15 Admin & selling 20 20 20 20 Depn @ 10% SLM 180 180 180 180PBT 295 465 635 635Less Tax 40% 118 186 254 254PAT 177 279 381 381Cash i/f =PAT+Depn 357 459 561 561

Yr O/F I/F N/F @14%DCF DCF

1 (1600) 0 (1600) 1 (1600)

2 (200) 357 157 0.877 138

3 459 459 0.769 353

4 561 561 0.675 379

5 1713 1713 0.592 1014

(561+1152) * 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:

(In Lacs)Sales 320Less Raw materials 180 Other manufacturing costsVariable 60Fixed 20 Allocated fixed cost 30 Depreciation 2 Selling exp. (100% Variable) 5 Interest 3 Total cost 300PBT 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* P & M* 16E & C 6

DF 14 (13.3%) Spares 1 23GP 1 yr Margin for WC 1 ** 24LOP 6 yrs

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

1 2 3 4 5 6Installed Capacity tonnes 2000 2000 2000 2000 2000 2000Production 1500 1500 1500 1500 1000 1000Sales (In Lacs) 48 48 48 48 32 32Less Costs RM 27 27 27 27 18 18 Manufacturing cost Variable 9 9 9 9 6 6 Selling exp 0.75 0.75 0.75 0.75 0.5 0.5 Depreciation 2.3 2.3 2.3 2.3 2.3 2.3PBT 9 9 9 9 5 5Less Tax 50% 4 4 4 4 3 3PAT 4 4 4 4 3 3Cash i/f-PAT + Depreciation 6.3 6.3 6.3 6.3 5.3 5.3Recovery of W.C. 0 0.33 0.67

Total Cash Flow 6.3 6.3 6.3 6.6 5.3 5.97

Yr O/F I/F N/F @14% DCF DCF1 (23) 0 (23) 1 (23)2 (1) 6.3 5.3 0.880 4.663 6.3 6.3 0.770 4.854 6.3 6.3 0.670 4.225 6.7 6.7 0.590 3.936 5.3 5.3 0.520 2.76

5.9 5.9 0.460 2.710.44

+ 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 Rs. (Lacs) Assets Rs. (Lacs)ESC 800 GFA 1374R & S 600 less Dep 39411% PSC 35 NFA 98012% Debn. 65 CA 88511% forex loan (Rs) 25 Cash 45CBB 16% 175Creditors 210

1910 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 cost Rs. 660 Lacs, the following means of financing is envisaged.

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. WACOC2. MCOC3. Reconcile the diff

ANSWER

Ke (ROI) = 206-3.85+36.8/ (800+600+394) = 13.3%

Marketing cap approach

Ke = Dividend per share + grown Market price per share

= 1.50 + 5.6% 30

= 10.6 %

Source Amount Weight Pre tax cost Post tax cost(pre tax x(1-t)

Wt avg. cost

ESC 800R & S 600Acc. Dep 394 1794 78% 13.3% 13.3% 10.37PSC 35 1.5% 11.0% 11.0% 0.16Debenture 65 2.8% 12.0% 4.8% 0.13Forex Loan 25 1.0% 11.0% 4.4% 0.04CBB 175 7.5% 16.0% 6.4% 0.48Creditors 210 9.2% - - -

2304 11.2

Source Amount Weight Pre tax cost Post tax cost(pre tax x(1-t)

Wt. avg. cost

ESC 180Int. Acc 50 230 35% 13.3% 13.3%. 4.66Forex 30 5% 13% 6.5% 0.33Debenture 300 45% 15% 7.5% 3.38T.L. 100 15% 14% 7.0% 1.05

6609.42%

PROBLEM NO 15:

The following is the Balance Sheet of M/s Lotus India ltd as on 31/12/10

Liabilities Rs. Assets Rs.

Equity share Capital 100000 Buildings 1000009% PSC 200000 Plant 200000Gen reserve 60000 Furniture 15000014% debentures 300000 Debtor 50000Creditors 40000 Cash at bank 180000O/s expenses 20000 Stock of RM 20000Of 08 (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 Account for the period 01/01/2011 to 31/12/2011

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

20,0002,42,000

Sales (12,000 units)- Cash- Credit

( Rs. 140 /Unit -1.5 %discount)

8,27,4008,27,400

Wages 3,60,000Variable Manufacturing overheads 1,20,000Variable Admin overheads 72,000Variable sales overheads 48,000

Preliminary Expense Written off 10,000 Fixed overheads Production 45,000 Admin 15,000 Sales 15,000

Depreciation@ 10% SLM Building 20,000 Plant 40,000 Furniture 30,000

Interest on debentures 42,0008% Dividend on Equity Shares 12,0009% Dividend on Pref. Shares 18,000Provision For Tax 1,72,740

Retained Earning (Balancing Figure) 3,73,06016,54,800 16,54,800

Budgeted Balance Sheet as on 31/12/2011

Liabilities Rs. Assets Rs.

Equity Share CapitalOld (Rs 10/- face value)New Issue (5000 Shares)

1 ,00,00050,000 1,50,000

BuildingLess: Deprecation

1,00,000(20,000

)80,000

Share PremiumGeneral Reserve carriedRetained Earnings (P/L)R&S

1,00,00060,000

3,73,0605,33,060 5,33,060

PlantLess: Depreciation

2,00,000(40,000

)1,60,000

9%Preference Shares 2,00,000FurnitureLess: Deprecation

1,50,000(30,000

)1,20,000

14% Debentures 3,00,000Raw material Stock (1200 Units @Rs.22/-) 26,400

Creditors13,420

Receivables 82,740

Outstanding expensesLess: paidOut standing expenses

20,000(15,000)

5,000 5,000

Preliminary ExpensesLess: Written Off

20,000(10,000

)10,000

Provision For Tax 1,72,740 Cash (balancing figure 9,25,080Prov. for Div on eq. shares 12,000Prov. for Div. on pref. shares

18,000

14,04,220 14,04,220

Budgeted Cash Flow for the Period (1.1.2011 – 31.12.2011)

Cash Inflows Rs. Cash Outflows Rs.

Opening cash Balance 1,80,000 R/M purchase (12,200 units @ Rs 22 per unit)

- Cash- 90% of Credit Purchase

1,34,2001,20,780

Cash Sales 8,27,400 Wages 3,60,00090% of Credit Sales 7,44,660 Variable Manufacturing overheads 1,20,000Liquidation of Debtors 2010 50,000 Variable Administration overheads 72,000New Equity Shares(5000 x Rs. 30) 1,50,000

Variable Sales overheads 48,000

Payment to Creditors of 2010 40,000Fixed Production Overheads 45,000Fixed Admin overheads 15,000Fixed Sales overheads 15,000Payment of 75% of O/s expenses 15,000Interest on Debentures 42,000

Cash Balance (Balancing Figure) 9,25,080

19,52,060 19,52,060

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 unitsAugust 5000 unitsSeptember 5000 unitsOctober 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 3800 unitsMay 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 ofmaterials 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.