Working Capital Assessment: Indian Institute of Banking & Finance
Working Capital Assessment: Indian Institute of Banking & Finance
Working Capital Assessment: Indian Institute of Banking & Finance
R.KANCHANAMALA
FACULTY MEMBER
IIBF
Traditional
INDIAN INSTITUTE OF BANKING & FINANCE Method
Funds required to acquire
current assets to enable
business/industry to
operate at the expected
levels.
INDIAN INSTITUTE OF BANKING & FINANCE
Own funds
Other
current Bank
liabilities borrowings
Working
borrowings
Deposits
from capital Advances
from
customers
public
Market Sundry
borrowing Creditors
Working Capital
Gap(WCG)
Gross working Net working capital
capital (Liquid surplus)
Total Current
Assets - Other
Total investment Current Current assets –
in current assets Liabilities Current liabilities
(Excl. Bank
Borrowings)
INDIAN INSTITUTE OF BANKING & FINANCE
Net worth FIXED ASSETS
100 LTU
105
LTS Long Term Liabilities 50
NON CURRENT ASSETS
---------------------------- 15
----- NWC
SHORT TERM BANK
BORROWINGS 30
------------------------------------------ CURRENT ASSETS
20 Finished Stock in
Goods Process 10
Days
Days
Length of Operating Cycle = 30+10+20+30 = 90 days
i.e. 4 Cycles in a year (365 / 90)
WORKING CAPITAL ASSESSMENT
INDIAN INSTITUTE OF BANKING & FINANCE
Assets which normally get converted into cash during the operating cycle of the entity
PROJECTED
ANNUAL TURNOVER SSI / MSME loans upto Rs. 5.00
METHOD cr
OPERATING CYCLE
METHOD Very small loans usually upto Rs. 2.00
lakhs
INDIAN INSTITUTE OF BANKING & FINANCE
MPBF METHOD
Applicable to borrowers with Fund based W/c limits up to and inclusive of Rs.5
Crores from the banking system.
Where outflow is more than in flows there is a cash deficit . Cash deficit
is computed from month to month and the highest level of cash deficit
called peak level cash deficit is financed .
Paid up stock
Bills/Receivables
Total DP
Operating expenses
---------------------------------------
No. of operating cycles in a year
= 25 lakhs
Monitor periodically.
THANK YOU
R.KANCHANAMALA
MOB:+91 7045660165
E.mail: [email protected]
INDIAN INSTITUTE OF BANKING & FINANCE