- This is from working capital requirements pgno.84 ques.no7
In this question part a. Debtors is 5 lakh .
However when calculating working capital requirements part b. Debtors are divided by 1.25
Why for wc requirements debtors are divided by 1.25??
Debtors should be 5lakh if wc calculated assuming overall basis or if assuming cash cost basis debtors should be multiplied by 0.75 assuming cogs=cos ???
The question is ambiguous.
Gross profit margin is on cost.
Ok sir… Thank you
But for question like this we should write assumption ?
Because for first part they have considered gross profit on sale (.i.e while calculating cogs for finding out inventory)
and for the second half thaey have considered gross profit on cost
Yes. It is a good practice to mention the assumptions taken in the solution.