Mpbf Case Study

Topics: Inventory, Balance sheet, Generally Accepted Accounting Principles Pages: 3 (509 words) Published: February 23, 2011
Case Study – ITA P. Ltd.

Method I
2010-112011-12
Total Current Assets 361.97384.03
Less Current Liabilities230.00180.00
(Excluding Bank Borrowings)
:. Working Capital GAP131.97204.03
25% of Working Capital Gap 32.99 51.01
:. MPBF 98.98153.02
Bank Borrowing150.00200.00
:. Excess Borrowing 51.02 47.02

Method II

Total Current Assets361.97384.03
Less 25% of CA 90.49 96.01
48. 288.02
Less Current Liabilities 230.00180.00
:. MPBF 41.48108.02
Bank Borrowing150.00200.00
:. Excess Borrowing108.52 91.98

11. 2011-12
1) Total Current Assets361.97384.03

2) Total Current Liabilities230.00180.00
(Other than Bank Borrowings
& T/L Installments due within
a year)

3) Working Cap. GAP (1 minus 2)131.97204.03

4) Min. stipulated working capital 90.49 96.01
(25% of total Current Assets
Excluding Export receivables)

5) Actual /Projected NWC
(Total CA Less Total CL)(35.60)(12.89)

6) Item No. 3 Minus 4 41.48108.02
(Method II)

7) Item No. 3 Minus 5167.57216.92

8) MPBF (Lower of 6 or 7) 41.48108.02

9) Excess Borrowings representing108.52 91.98
Shortfall in WWC (i.e. Difference
Between B.B. & MPBF)

a) Since there is already excess borrowing compared to MPBF, there is no case for enhancement in Working Capital.

b) Working Capital Eligibility
Method I 98.98 MPBF – gives Excess Borrowing 51.02

c) Working Capital Eligibility
Method II41.48 MPBF – gives Excess Borrowing 108.52

d) It is possible for Bank to finance Packing Credit for specific export order received by the Co. Since the total order is of US $ 11,250/-, the Co. can be granted P/C Facility of US $ 11,250/- less Profit portion.

e) It is o.k. to...
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