ЁЯУв Too many exams? DonтАЩt know which one suits you best? Book Your Free Expert ЁЯСЙ call Now!

    Question

    XYZ Ltd. has furnished the following details to the bank

    while seeking working capital finance for the upcoming financial year: тАв Total Current Assets (TCA): тВ╣1,200 lakh тАв Current Liabilities (other than bank borrowings): тВ╣400 lakh тАв The company follows the Second Method of Lending as per Tandon Committee norms Additionally, the company has proposed a bank borrowing of тВ╣900 lakh, citing seasonal cash flow fluctuations. Based on the above, what is the Maximum Permissible Bank Finance (MPBF) the bank can sanction under the Second Method of Lending? What would be the correct observation regarding the company's funding request?
    A MPBF is тВ╣800 lakh; full loan can be sanctioned Correct Answer Incorrect Answer
    B MPBF is тВ╣600 lakh; тВ╣900 lakh request exceeds permissible limit Correct Answer Incorrect Answer
    C MPBF is тВ╣700 lakh; sanction depends on seasonal needs Correct Answer Incorrect Answer
    D MPBF is тВ╣900 lakh; company is fully eligible Correct Answer Incorrect Answer

    Solution

    Under Second Method, MPBF = 75% of (TCAтАУCL) = 75%├Ч (тВ╣1,200тАУтВ╣400)┬а Company requested тВ╣900 lakh, which exceeds the MPBF by тВ╣300 lakh.

    Practice Next
    More Accounts Questions
    ask-question