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    WORKING CAPITAL TUTORIAL - Pratical Questions

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    Manan Chhabra

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    WORKING CAPITAL TUTORIAL - Pratical Questions

    Uploaded by

    Manan Chhabra
    11 views14 pages

    Original Title

    8. WORKING CAPITAL TUTORIAL- Pratical Questions

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    © © All Rights Reserved

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    11 views14 pages

    WORKING CAPITAL TUTORIAL - Pratical Questions

    Uploaded by

    Manan Chhabra

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    You are on page 1of 14

    WORKING CAPITAL

    TUTORIAL
    PRACTICAL QUESTIONS
    Question 1
    Solution 1

    Gross Working Capital = Net Working


    Total of Current Assets Capital=Current Assets—
    Current Liabilities
    = Total of Current Assets=Rs 3,
    60,000+40,000+20,000+60, 80,000
    000+ Total of Current Liabilities
    90,000+20,000+90,000
    = Rs 3, 80,000 =1,50,000+30,000+20,000+
    50,000+
    20,000+30,000 =Rs 3,
    From Question 1 calculate Absolute
    Liquid Ratio

    Absolute Liquid Ratio= Absolute Liquid Assets/ Current


    Liabilities
    Absolute Liquid Assets= Cash in Hand + Marketable
    Securities
    = 90,000+60,000= 1,50,000
    Current Liabilities = 3,00,000
    1,50,000/3,00,000 = 0.5
    Question 2

    Calculate Current Ratio and Quick Ratio from following


    information:
    Solution 2

     Current Assets = Inventories + Trade receivables + Advance tax


    + Cash and cash equivalents
    = Rs. 50,000 + Rs. 50,000 + Rs. 4,000 + Rs.
    30,000
    = Rs. 1,34,000
     Current Liabilities = Trade payables + Short-term borrowings
    = Rs. 1,00,000 + Rs. 4,000
    = Rs. 1,04,000
     CURRENT RATIO = Current Assets/ Current Liabilities
    = Rs.1,34,000 / Rs.1,04,000
    =1.29 :1
    Contd…

     QUICK RATIO = Quick Assets/ Current Liabilities

     Quick Assets = Current assets – (Inventories + Advance tax)


    = Rs. 1,34,000 – (Rs. 50,000 + Rs. 4,000)
    = Rs. 80,000
     Current Liabilities = Rs. 1,04,000

     QUICK RATIO = Quick Assets/ Current Liabilities


    = Rs. 80,000 / Rs. 1,04,000
    = 0.77 :1
    Question 3

    The current assets and the current liabilities of a trading company


    ABC are as under
    Current assets: Rs
    Current liabilities: Rs
    Cash and Bank: 5,000 Accounts
    Payable: 15,000
    Marketable securities: 18,000 Accrued payable:
    5,000
    Accounts receivables: 8,000 Notes Payable:
    8,000
    Inventories: 10,000
    Solution 3

    Current Assets= Rs 41,500


    Current liabilities= 28,000
    Current Ratio= 41,500/28,000= 1.48
    Quick Ratio= Quick Assets/ Current Liabilties
    = 41,500- 10,000-500= 31,000/ 28,000= 1.10
    Absolute Liquid Ratio= Absolute Liquid Assets/ Current Liabilities
    Absolute Liquid Assets= Cash + Marketable Securities= 5,000+
    18,0000= 23,000
    = 23000/28,000= 0.82
    Extract from financial accounts of M/s
    RT Ltd.
    Assets (RSs) Liabilities(Rs.)
    Stock 10,000
    Debtors 30,000
    Prepaid Expenses 2,000
    Cash in hand 20,000
    Sundry Creditors 25,000
    Bank overdraft 15000
    Total 62,000 40,000
    Sales Rs. 3,50,000

    Calculate Current Ratio, Acid Test Ratio , Abolute Liquid Ratio, Stock turn over
    Ratio , Working Capital and Debtor Turnover Ratio
    Solution

     Current ratio= Current Assets/Current Liabilities


    = 62,000/ 40,000 = 1.55:1
     Acid Test Ratio= Liquid Asset/ Current liability
    = 50,000/40,000= 1.25:1
     Absolute Liquid Ratio= Absolute Liquid Assets (cash +
    Marketable
    Securities)/ Current Liability
    = 20,000/40,000 = 0.5: 1
    Contd…

     Stock Turn Over Ratio = Net Sales/ Average Inventory


    (stock)
    = 3,50,000/ 10,000= 35 Times

     Working Capital Turnover Ratio = Sales/ Net Working


    Capital
    Net working Capital = Current Assets- Current
    liabilities
    = 62,000- 40,000= 12,000
    = 3,50,000/12,000= 29.17 Times
    Contd…

     Debtor Turnover Ratio or Accounts Receivable


    Turnover Ratio =
    Net Credit Sales / Average Accounts Receivables
    (Debtors)
     We assume sales as credit sales, so = 3,50,000/ 30,000

    = 11.67
    THANK YOU !

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