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8. JKL Company Ltd. has current assets of ` 1,00,00,000 and current liabilities of ` 50,00,000. The Financial manager of the company desires to make a provision for contingencies @20% of working capital. Accordingly, what would be the amount of working capital requirement for the company?

Options

A` 55 Lakh
B` 60 Lakh
C` 65 Lakh
D` 70 Lakh Case Scenario - III Primo Neo Logistics (PNL) is engaged in transportation of goods in India. It has its operational presence across the country since the year 2010. In addition to transporting goods by road, company is also taking services of private airways as its logistics partner. However, there is a sharp decline in business through airways as sales and profits have declined steeply. Company also wants to ascertain the market positions of rival companies having similar competitive approaches in the market with the intent to identify the strongest or the weakest players in view of the tough competitive landscape. Once the market position is ascertained, company would like to modify its strategy to adapt according to the changing circumstances. Technology, means and ways of transporting goods are also changing. Company wants to utilize its resources and capabilities, not only to compete and survive but to grow efficiently. Multidimensional expansion with new and improved means of transportation and marketing seems inevitable. Company has strong presence in transporting goods by road and wants to collaborate with some other operator who can bring expertise in transporting goods using improved technology. Cargo Movers Plc. (CMP) is a well-known transporter of goods using state of art technology in the Asia Pacific region. Banking upon their respective core competencies, PNL and CMP would like to develop close and collaborative relationship where both will continue to maintain their respective independent existence. Once collaboration is in place, marketing team of both the companies would like to cater to the needs of transporting goods with speed and agility. In line with basic principles, the team will also focus on best long- run performance of the marketing system. In view of the same the team is planning to rope in various social media influencers with intent to create a brand image with customer orientation and spreading a word about its distinctive services to its present and prospective customers. FINANCIAL MANAGEMENT AND STRATEGIC MANAGEMENT Based on the above case scenario, choose the correct answer to Q. Nos. 9 to 13.
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Correct Answer

✅ Option B — ` 60 Lakh

All Options:

  • A` 55 Lakh
  • B` 60 Lakh ✓
  • C` 65 Lakh
  • D` 70 Lakh Case Scenario - III Primo Neo Logistics (PNL) is engaged in transportation of goods in India. It has its operational presence across the country since the year 2010. In addition to transporting goods by road, company is also taking services of private airways as its logistics partner. However, there is a sharp decline in business through airways as sales and profits have declined steeply. Company also wants to ascertain the market positions of rival companies having similar competitive approaches in the market with the intent to identify the strongest or the weakest players in view of the tough competitive landscape. Once the market position is ascertained, company would like to modify its strategy to adapt according to the changing circumstances. Technology, means and ways of transporting goods are also changing. Company wants to utilize its resources and capabilities, not only to compete and survive but to grow efficiently. Multidimensional expansion with new and improved means of transportation and marketing seems inevitable. Company has strong presence in transporting goods by road and wants to collaborate with some other operator who can bring expertise in transporting goods using improved technology. Cargo Movers Plc. (CMP) is a well-known transporter of goods using state of art technology in the Asia Pacific region. Banking upon their respective core competencies, PNL and CMP would like to develop close and collaborative relationship where both will continue to maintain their respective independent existence. Once collaboration is in place, marketing team of both the companies would like to cater to the needs of transporting goods with speed and agility. In line with basic principles, the team will also focus on best long- run performance of the marketing system. In view of the same the team is planning to rope in various social media influencers with intent to create a brand image with customer orientation and spreading a word about its distinctive services to its present and prospective customers. FINANCIAL MANAGEMENT AND STRATEGIC MANAGEMENT Based on the above case scenario, choose the correct answer to Q. Nos. 9 to 13.

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Detailed Solution & Explanation

To calculate the working capital requirement for JKL Company Ltd.:

**1. Net Working Capital (NWC):**
* Current Assets (CA) = Rs. 1,00,00,000\displaystyle \text{Rs. } 1,00,00,000
* Current Liabilities (CL) = Rs. 50,00,000\displaystyle \text{Rs. } 50,00,000
* Net Working Capital=CA−CL=Rs. 1,00,00,000−Rs. 50,00,000=Rs. 50,00,000\displaystyle \text{Net Working Capital} = \text{CA} - \text{CL} = \text{Rs. } 1,00,00,000 - \text{Rs. } 50,00,000 = \text{Rs. } 50,00,000 (which is Rs. 50 Lakh\displaystyle \text{Rs. } 50 \text{ Lakh})

**2. Provision for Contingencies:**
* The provision is @ 20%\displaystyle 20\% of working capital.
* Provision=20%×Net Working Capital=0.20×Rs. 50,00,000=Rs. 10,00,000\displaystyle \text{Provision} = 20\% \times \text{Net Working Capital} = 0.20 \times \text{Rs. } 50,00,000 = \text{Rs. } 10,00,000 (which is Rs. 10 Lakh\displaystyle \text{Rs. } 10 \text{ Lakh})

**3. Total Working Capital Requirement:**
* Total Working Capital Requirement=Net Working Capital+Provision\displaystyle \text{Total Working Capital Requirement} = \text{Net Working Capital} + \text{Provision}
* Total Working Capital Requirement=Rs. 50,00,000+Rs. 10,00,000=Rs. 60,00,000\displaystyle \text{Total Working Capital Requirement} = \text{Rs. } 50,00,000 + \text{Rs. } 10,00,000 = \text{Rs. } 60,00,000 (which is Rs. 60 Lakh\displaystyle \text{Rs. } 60 \text{ Lakh})

Hence, **Option B** is the correct answer.

Key Concepts to Understand

Working Capital

The excess of current assets over current liabilities, representing the short-term liquidity available to a business for its day-to-day operations. Positive working capital indicates good short-term financial health.

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