Question

    What does the concept of "Drawing Power" refer to in a

    Cash Credit facility?
    A The total amount of money a borrower can withdraw from the bank. Correct Answer Incorrect Answer
    B The value of assets pledged by the borrower to secure the loan. Correct Answer Incorrect Answer
    C The amount that a borrower can withdraw from the sanctioned credit limit based on the latest stock and receivables statement. Correct Answer Incorrect Answer
    D The repayment schedule agreed upon for the loan. Correct Answer Incorrect Answer
    E The total credit limit sanctioned by the bank to the borrower. Correct Answer Incorrect Answer

    Solution

    Drawing Power (DP) is the amount a borrower can withdraw from the sanctioned limit based on the current value of stock and receivables, adjusted by the bank's margin policy

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