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INDEX
PART1
Definition
A business organisation needs financing not only to
acquire fixed assets but also for its day -to-day
operations. It has to obtain raw materials, process
the same, pay wage bills, transport finished goods,
provide credit to customers.
Capital or funds required for the 'day to day'
operations of an organisation is called the 'Working
Capital.
Operating Cycle
Operating cycle is the time that elapses between the
company's outlay raw materials, wages and other
expenditures and the inflow of cash from sale of
goods.
Classification
The working capital assistance provided by banks
can broadly be classified as
Fund based
Non-fund based.
The difference between fund and non-fund
assistance lies mainly in the cash outflow.
Fund based assistance involves an immediate cash
outflow
While non fund based may or may not involve cash
outflow from the bank.
Tree Diagram
Computation of MPBF
Once the estimation of the reasonable level of
current assets required for the operation of the unit
is completed the source of financing the same is
decided.
A part of the total current assets can be financed by
credit for purchases and other current liabilities.
The funds for financing the working capital gap is
bridged from the borrower's owned funds and long
term borrowings and partly from borrowings from
the bank.
Below is the three methods suggested by Tandon
committee.
Illustration, Method 1
First Method
740
300
440
110
MPBF
330
Current ratio
1.17:1
Illustration, Method 2
Second Method
740
185
Less
555
300
MPBF
255
Current ratio
1.33:1
Turnover Method
The genesis of the Turnover Method of assessment
is based on the recommendations of Nayak
Committee for ensuring adequate flow of credit to
small borrowers.
Under this method, the working capital
requirements are estimated at 25% of the projected
turnover.
Of the working capital requirement, banks can
finance to the maximum extent of 20% of the
projected turnover and the balance 5% is the Net
Working Capital to be brought in by the borrower as
his margin.
INDEX
PART1
Proposed Exposure:
Facility
Amt (` in million)
100.0
(100.0)
500.0
BG
(500.0)
Total
600.0
Financial Statements
BUTTERFLY
Conclusion
The projected values for the client is not that
exciting without the Tamilnadu Governments order
which contributes nearly 45% to companys revenue
in earlier years.
But the good news is that the client has recently
bagged the Governments order once again which
will add that much required cushion to the projected
value.
INDEX
PART1
SCB
Present limits
FB
NFB
70.0
1980.0
Proposed Exposure:
Facility
Amt (` in million)
Cash Credit
(100.0)
FCNR(B)
(100.0)
WCDL
(100.0)
(100.0)
LC
(100.0_
BG
250.0
Derivative
Total
50.0
300.0
FINANCIAL STATEMENTS
Eversendai
Conclusion
As we are projecting a positive figure for 2014
onwards and the parent entity has a very good track
record in the market we are going ahead with the
proposal despite having a negative PAT in the year
2013.
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