Financial ManagementQuestion 5525 of 217
All Questions

3. What will be the total estimated current assets on cash cost basis?

Options

A` 8,31,250
B` 7,18,750
C` 7,25,250
D` 7,10,250 (2 Marks)
For any discrepancies in this question, email contact@cadada.in

Correct Answer

✅ Option D — ` 7,10,250 (2 Marks)

All Options:

  • A` 8,31,250
  • B` 7,18,750
  • C` 7,25,250
  • D` 7,10,250 (2 Marks) ✓

Ad

Detailed Solution & Explanation

To find the total estimated current assets on a cash cost basis, we sum the cash balance and the working capital asset components:

**1. Cash Balance:**
Minimum cash balance required is given directly as:
Cash Balance=‘90,000\text{Cash Balance} = ` 90,000

**2. Stock of Raw Material:**
Stock of raw material is held at 1.5 months of its consumption (annual consumption is ` 7,50,000 from Question 1):
Stock of Raw Material=Raw Material Consumed×1.512\text{Stock of Raw Material} = \text{Raw Material Consumed} \times \frac{1.5}{12}
Stock of Raw Material=‘7,50,000×1.512=‘93,750\text{Stock of Raw Material} = ` 7,50,000 \times \frac{1.5}{12} = ` 93,750

**3. Finished Goods Inventory:**
Finished Goods Inventory=‘1,72,500 (from Question 2)\text{Finished Goods Inventory} = ` 1,72,500 \text{ (from Question 2)}

**4. Total Debtors:**
Total Debtors=‘3,31,500 (from Question 2)\text{Total Debtors} = ` 3,31,500 \text{ (from Question 2)}

**5. Prepaid Sales Promotion Expenses:**
Expected annual sales promotion expenses of ` 90,000 are paid quarterly in advance. Paying quarterly in advance means that at any point, there is 1 quarter (3 months) of expenses prepaid:
Prepaid Sales Promotion=‘90,000×312=‘22,500\text{Prepaid Sales Promotion} = ` 90,000 \times \frac{3}{12} = ` 22,500

**6. Total Estimated Current Assets:**
Total Current Assets=Cash Balance+Stock of Raw Material+Finished Goods Inventory+Total Debtors+Prepaid Sales Promotion\text{Total Current Assets} = \text{Cash Balance} + \text{Stock of Raw Material} + \text{Finished Goods Inventory} + \text{Total Debtors} + \text{Prepaid Sales Promotion}
Total Current Assets=‘90,000+‘93,750+‘1,72,500+‘3,31,500+‘22,500=‘7,10,250\text{Total Current Assets} = ` 90,000 + ` 93,750 + ` 1,72,500 + ` 3,31,500 + ` 22,500 = ` 7,10,250

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

More Questions from Financial Management

If A={1,2,3,4,5}\displaystyle A = \{1, 2, 3, 4, 5\}, B={2,4}\displaystyle B = \{2, 4\} and C={1,3,5}\displaystyle C = \{1, 3, 5\} then (A−C)×B\displaystyle (A - C) \times B is:

If f(x)=x2−5\displaystyle f(x)=x^2-5, evaluate f(3)\displaystyle f(3), f(−4)\displaystyle f(-4), f(5)\displaystyle f(5), and f(1)\displaystyle f(1).

Out of a group of 20\displaystyle 20 teachers in a school, 10\displaystyle 10 teach Mathematics, 9\displaystyle 9 teach Physics and 7\displaystyle 7 teach Chemistry. 4\displaystyle 4 teach Mathematics and Physics but none teach both Mathematics and Chemistry. How many teach Chemistry and Physics; how many teach only Physics?

If A={1,2,3,4,5,7,8,9}\displaystyle A = \{1, 2, 3, 4, 5, 7, 8, 9\} and B={2,4,6,7,9}\displaystyle B = \{2, 4, 6, 7, 9\} then how many proper subset of A∩B\displaystyle A \cap B can be created?

The number of subsets of the set {0,1,2,3}\displaystyle \{0, 1, 2, 3\} is:

If f(x)=x2+x−1\displaystyle f(x) = x^2+x-1 and 4f(x)=f(2x)\displaystyle 4f(x) = f(2x), then find the value of 'x'.

Ready to Master Financial Management?

Practice all 217 questions with instant feedback, earn XP, track your streaks, and ace your CA Foundation exam.

Start Practicing — It's Free