Beruflich Dokumente
Kultur Dokumente
WORKING CAPITAL
WC Assessment is outcome of two variables:
The volume of activity Production & Sales
Required level of current assets (Inventory &
Receivables) to enable the unit to carry on
operations without interruptions
Renewal of Limits
For Renewals/Enhancements:
(Put a clause in the sanction letter itself)
Send an intimation 2 months prior to renewal.
Call for:
Audited Financial Statements for 2 years
Traditional method
Trade
& Services
C&I
Industrial
SUGGESTED METHOD
Upto 5
Above 5
All loans
Upto 1
Above 1
upto 5
Above 5
Below 0.25
Above 5
OPERATING CYCLE
30
Days
Cash
60
Days
Bills
Receivable
20
Days
OPERATING
CYCLE
Finished
Goods
Raw
Material
Stock in
Process
10
Days
Traditional Method
Stocking
period
(Rs. In lacs)
Cost of Production P.M. = 90
WC
required
Margin
(%)
Amt
Permissible
Limit
Raw Material
1m
80
20
16
64
Work in process
2w
45
33
15
30
Finished Goods
2w
45
20
09
36
Receivable
1m
90 (100)40
40
60
Expenses
1m
10
10
Total
Less: Advance Payment
Credit on purchase
Working Capital
Required
270
100
190
15
10
245
Trends
Inter-firm comparison
Industry Levels
Borrowers specific strengths & weaknesses
Suggested levels of inventory & receivables
Production Policy Constant/seasonal
Processing time
Processing technology
No. of shifts
Sundry Debtors
Trade practices
Market conditions
Bulk sales - benefits
Price advantage
Seasonality (vis. rain coats, woollen garments)
Total CA
Other CL
(A - B)
(C - D)
Current
Year
Next
Year
Evaluation of Liquidity
Benchmark current ratio is 1.33
Depends upon:
Size of operation
Overall financial position
Term Loan installments
Export oriented units
Expansion of existing capacity
Setting up new unit
Reduction in level of deposits accepted, etc.
Month
Sales
540 720 360 360 100 180 300 360 360 240 240
450
Receipts
351 531 657 414 334 147 180 288 351 348 258
261
Cash Sales
54
72
36
36
10
18
36
36
State Bank
10
11 of India
12
24
45
Collections
297 459 621 378 324 129 150 252 315 324 234
216
Payments
383 536 633 356 317 172 221 314 381 338 254
311
To Creditors
168
70
30
24
Wages
81
108
54
54
15
27
45
54
54
36
36
68
Others
50
50
75
50
50
75
50
50
75
50
50
75
-32
-5
24
58
17
-25
-41
-26
-30
10
-50
10
-22
-27
-3
55
72
47
-20
-50
-40
-36
-22
-27
-3
55
72
47
-20
-50
-40
-36
-86
Cash in Hand
10
10
10
10
10
10
10
10
10
10
10
10
Cum.Surplus/
Deficit
-32
-37
-13
45
62
37
-4
-30
-60
-50
-46
-96
Surplus/Deficit
BF Cash
Cum. Cash
TURNOVER METHOD
COMPUTATION
A.
B.
C.
D.
E.
F.
G.
H.
1200
1200
300
60
20
240
280
LC Assessment
FLC ILC
1
2
3
4
5
6
7
Annual purchase/import
Out of (1) on credit basis
Out of (2) on usance LC basis
Average of (3) per month
Lead time (no. of months)
Usance period (no. of months)
Usance LC requirement (5+6) X (4)
TRADITIONAL METHOD
Name of the Unit: ABC Ltd Credit on purchases 80
(Rs. In 000s)
Anticipated monthly sales = 200
Cost of Production per month =190
Cost of Raw Material per month = 150 Advance Payments from Customers 30
Item
Stocking /
Payment
period
WC
required
Margin
(%)
Raw Material
1m
25
Work in process
2w
25
Finished Goods
2w
25
Receivable
1m
33
Expenses
1m
100
Amt
Total
Less: Advance Payment
Credit on purchase
Working Capital Required
Net Deficit
Permissible
Limit
TRADITIONAL METHOD
Name of the Unit: ABC Ltd Credit on purchases 80
(Rs. In 000s)
Anticipated monthly sales = 200
Cost of Production per month = 190
Cost of Raw Material per month = 150 Advance Payments from Customers 30
Item
Stocking /
Payment
period
WC
required
Margin
(%)
Amt
Permissible
Limit
Raw Material
1m
150
25
37
113
Work in process
2w
95
25
24
71
Finished Goods
2w
95
25
24
71
Receivable
1m
190
33
66
134
Expenses
1m
40
100
40
00
Total
570
389
30
Credit on purchase
80
460