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    Q1. Following Details Pertain To Amkit India LTD For Sale Volume of 240,000 Units: Balance Sheet As On 31 March 2020 Income Statement For 2019-20

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    Rohan Sahini
    Amkit India Ltd expects to sell 360,000 units next year. To meet industry standards of efficiency for working capital, it will require Rs. 26.7 million. This includes current assets of Rs. 32.7 million (raw materials of Rs. 6 million, work in progress of Rs. 3 million, finished goods of Rs. 15 million, debtors of Rs. 7.5 million, and cash of Rs. 1.2 million) and current liabilities of Rs. 6 million (creditors). Key assumptions are that raw material inventory will suffice 1 month of production, work in progress 1 month, and finished goods 1.5 months of sales.

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    Q1. Following Details Pertain To Amkit India LTD For Sale Volume of 240,000 Units: Balance Sheet As On 31 March 2020 Income Statement For 2019-20

    Uploaded by

    Rohan Sahini
    449 views6 pages
    Amkit India Ltd expects to sell 360,000 units next year. To meet industry standards of efficiency for working capital, it will require Rs. 26.7 million. This includes current assets of Rs. 32.7 million (raw materials of Rs. 6 million, work in progress of Rs. 3 million, finished goods of Rs. 15 million, debtors of Rs. 7.5 million, and cash of Rs. 1.2 million) and current liabilities of Rs. 6 million (creditors). Key assumptions are that raw material inventory will suffice 1 month of production, work in progress 1 month, and finished goods 1.5 months of sales.

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    Amkit India Ltd expects to sell 360,000 units next year. To meet industry standards of efficiency for working capital, it will require Rs. 26.7 million. This includes current assets of Rs. 32.7 million (raw materials of Rs. 6 million, work in progress of Rs. 3 million, finished goods of Rs. 15 million, debtors of Rs. 7.5 million, and cash of Rs. 1.2 million) and current liabilities of Rs. 6 million (creditors). Key assumptions are that raw material inventory will suffice 1 month of production, work in progress 1 month, and finished goods 1.5 months of sales.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    449 views6 pages

    Q1. Following Details Pertain To Amkit India LTD For Sale Volume of 240,000 Units: Balance Sheet As On 31 March 2020 Income Statement For 2019-20

    Uploaded by

    Rohan Sahini
    Amkit India Ltd expects to sell 360,000 units next year. To meet industry standards of efficiency for working capital, it will require Rs. 26.7 million. This includes current assets of Rs. 32.7 million (raw materials of Rs. 6 million, work in progress of Rs. 3 million, finished goods of Rs. 15 million, debtors of Rs. 7.5 million, and cash of Rs. 1.2 million) and current liabilities of Rs. 6 million (creditors). Key assumptions are that raw material inventory will suffice 1 month of production, work in progress 1 month, and finished goods 1.5 months of sales.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 6

    Q1.

    Following details pertain to Amkit India Ltd for sale volume of 240,000 units:

    Balance Sheet as on 31st March 2020 Income Statement for 2019-20


    (Rs in (Rs in
    Liabilities '000) Assets '000) (Rs in '000)
    Share
    Capital 3000 Fixed Assets 2200 Raw material 4800
    Reserves 2000 Raw materials 800 Wages 1200
    Sundry Work-in-
    Creditors 400 progress 200 Overheads 3600
    Finished goods 1000 Profits 2400
    Sundry debtors 1000 Sales 12000
    Cash 200
    5400 5400
    a) Determine the operating cycle and cash cycle period. Make necessary assumptions wherever required.

    b) Similar firms from the industry hold raw material inventory that would suffice approximately 1 month o
    finished goods inventory that will suffice sales for 1 ½ month. Moreover, customers of competitor firms ta
    to clear their dues. Going forward, banks are unlikely to finance working capital requirements that is in ex
    norms. If Amkit India Ltd expects to sell 3,60,000 units next year, how much working capital will it requi
    meet industry standards of efficiency. The company has a policy of maintaining cash balance that is sufficien
    its cost of production for three days.

    a)       Estimation of Inventory, Receivables and Payables Period:


    *Assuming 360 days in a year
    1.       Inventory Period
    a.     RM Inventory Period =

    b.     WIP Inventory Period =

    *Assuming uniform production cycle and 100% input at the beginning of the process, cost of WIP = RM cost + 50%

    c.     FG Inventory Period =

    *Assuming all overheads are direct, & hence included in COGS, also ignoring change in WIP & FG stocks
    Total Inventory Period = 107.5 days

    2.       Receivables Period


    Receivables Period

    *Assuming all sales are credit sales

    3.       Payables Period


    Payables Period
    *Assuming credit purchases include only raw materials, raw materials purchases are equal to raw material consump

    Operating Cycle = Inventory Period + Receivables Period = 107.5 days + 30 days = 137.5 days

    Cash Cycle = Operating Cycle – Payables Period = 137.5 – 30 = 107.5 days

    WORKING CAPITAL ESTIMATES=CA-CL

    CA
    INVENTORY
    RMI ((360000*20)/360) *30 DAYS

    WIPI (360000*20+(5+15/2)/360 *10 DAYS

    FG ((360000*40)/360)* 37.5 DAYS

    DEBTORS ((360000*50)/360) * 15 DAYS

    CASH ((360000*40)/360)* 3 DAYS


    TOTAL CURRENT ASSETS

    CREDITORS ((360000*20)/360)* 30 DAYS

    TOTAL CURRENT LIABILITIES

    WORKING CAPITAL REQUIREMENTS (CA-CL)


    0 units:

    Income Statement for 2019-20

    (Rs in '000)

    w material 4800
    ges 1200

    rheads 3600
    its 2400
    es 12000
    4800/240=20
    1200/240=5
    ary assumptions wherever required. 3600/240=15

    would suffice approximately 1 month of production and


    oreover, customers of competitor firms take about 15 days
    12000/240=50
    working capital requirements that is in excess of industry
    r, how much working capital will it require, if it is able to
    f maintaining cash balance that is sufficient enough to meet
    4800/360

    OC=ICP+DCP
    ICP=RMCP+WIPCP+FGCP

    WIP=RM+ WAGES+OVERHEADS

    of the process, cost of WIP = RM cost + 50% of Wages & Allocable Overheads

    gnoring change in WIP & FG stocks

    360/DTR
    OC=ICP+DCP
    60+10+37.5+30=137.5 DAYS

    NOC=OC-CPP
    137.5 - 30= 107.5 DAYS
    360/CTR
    purchases are equal to raw material consumption (i.e., ignoring changes in RM stocks for which information is also not available) and th

    + 30 days = 137.5 days

    20

    INDUSTRY PRACTICE
    360) *30 DAYS 600000 30 DAYS

    5+15/2)/360 *10 DAYS 300000 10 DAYS 4800/240=20


    20
    360)* 37.5 DAYS 1500000 45 DAYS

    360) * 15 DAYS 750000 15 DAYS 1200000/240000=50

    360)* 3 DAYS 120000 3 DAYS


    3270000

    360)* 30 DAYS 600000

    600000

    2670000
    +WIPCP+FGCP

    WAGES+OVERHEADS

    5+30=137.5 DAYS

    107.5 DAYS
    also not available) and that all raw material purchases are on credit.

    20*3600=7200

    4800/240=20 1200/240 3600/240


    5 15

    1200000/240000=50 750000

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