300 Analysis

Working capital – Bank finance – Problems

1. The details of current assets and current liab of ABC limited are as under: find MPBF as per all the three methods of Tandon committee method
Current assets Rs in lacs Current liab Rs in lacs
Raw material 200 Creditors 250
WIP 100 Other CL 50
Finished goods 200 Bank borrowings 300
Receivables 300 total cL 600
Other CA 50 Total Core CA (CCA) 300
Total CA 850 2. From the following data calculate MPBF under all the 3 methods of Tandon committee
Current assets Rs in lacs Current liabilities Rs in lacs
Raw material 180 Creditors 120
Work in progress 50 Other current liab 30
Finished goods 100 Bank borrowings 250
Recievables 150 total Current Liab 400
Other CA 20 Core Current assets (CCA) 200
Total CA 500

3. You have applied to a nationalized bank for working capital finance. The bank follows second method of lending: Find the amount the bank can sanction as working capital finance (MPBF)
Current Liab Rs in lacs Bank norms
Creditors for purchases (2m) 400 1 m
Other Current liab 200 --
Total liab 600
Current assets
Raw material (4m) 800 2m
WIP (10 days) 80 7 days
Finished goods (1 mth) 360 20 days
Receivables (15 days) 200 15 days
Other CA 40 --
Total CA 1480

4. Problem on Nayak committee
An SSI unit is having a turnover of Rs.100 lacs in the year 2010-11 and expects a turnover of Rs.150 lacs in the year 2011-12. How much amount the bank will sanction as working capital (MPBF) as per Nayak committee.
Estimate the value of MPBF (i) when the NWC proposed for the unit is Rs. 7.50 lacs ii. when the NWC proposed for the unit is Rs. 10 lacs in the year 2011-12.

Working capital – Management – Estimation and calculation
Raw material conversion period (RMCP) = (Average RM/ RM consumption ) x 365
WPCP = ( Average WIP / cost of production) x 365