Question

    In the context of Cash Credit (CC) facilities, what does

    the term 'Drawing Power' refer to?
    A The total working capital limit sanctioned by the bank Correct Answer Incorrect Answer
    B The amount that the borrower can withdraw from the sanctioned credit limit based on the value of their stock and receivables Correct Answer Incorrect Answer
    C The percentage of stock considered by the bank for collateral Correct Answer Incorrect Answer
    D The rate of interest charged on the credit facility Correct Answer Incorrect Answer
    E The credit score used by the bank to assess the borrower’s risk Correct Answer Incorrect Answer

    Solution

    Drawing Power refers to the amount a borrower can withdraw from their sanctioned working capital limit. It is calculated based on the value of stock, book debts, and creditors, adjusted by a margin set by the bank.

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