The following information is available for SK Limited for the year ended on 31st March, 2024: Particulars ₹ Cost of production 15,48,000 Cost of…

Operating Cycle = R + W + F + D - C Where, R = Raw material storage period = 65 days W = Work-in-progress inventory holding period = Average Work-in-progress inventory / Average Cost of Production per day = 94,600 / (15,48,000 ÷ 360 days) = 22 days F = Finished goods storage period = Average stock of finished goods / Average Cost of Goods Sold per day = 2,43,500 / (14,61,000 ÷ 360 days) = 60 days D = Receivables (Debtors) collection period = 36 days C = Credit period allowed by suppliers (Creditors) = 63 days Net Operating Cycle = 65+22+60+36-63 = 120 days Number of Operating Cycles in a year = No. of days in a year / Operating Cycle period = 360 days / 120 days = 3 times Amount of Working Capital Required = Annual Operating Cost / Number of Operating Cycles = (14,61,000 +4,14,000) / 3 = 6,25,000