Eagle Tyres Ltd. an existing tyre and tube manufacturing unit proposes to expand its operations and increase itsmanufacturing capacity. Details of the working capital requirements of the company projected for the first year ofoperations after expansion are as given under:Items Rupees in lakhRaw materials 480.00Consumables 24.00Work-in-process 65.00Finished goods 236.00Receivables 686.00Other current assets (other than cash) 100.00Sundry creditors 600.00The margin money requirement is 25% of working capital gap. Existing margin money and bank finance for working capitalamount to Rs.223 lakh and Rs.660 lakh respectively.Required:Determine the existing working capital with the company prior to expansion and the increase in working capitalrequired given that the company's existing creditors were worth Rs.75 lakh.

The working capital gap is difference of current assets and current liabilities. Sometimes, the…

Answered: Eagle Tyres Ltd. an existing tyre and…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 4P

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Eagle Tyres Ltd. an existing tyre and tube manufacturing unit proposes to expand its operations and increase its manufacturing capacity. Details of the working capital requirements of the company projected for the first year of operations after expansion are as given under: