Question

A manufacturing unit shows a revenue growth of 8%, while its reported physical inventory levels have jumped by 65%. During an unannounced stock audit ordered by the lead bank, the auditor reports that the physical stock present in the factory godown is worth only ₹10 Crore, whereas the company submitted a stock statement claiming ₹40 Crore to draw cash credit funds. Which two Red Flag indicators from the bank's checklist are directly triggered here?

Q: Answer-A manufacturing unit shows a revenue growth of 8%, while its reported physical inventory levels have...

Why Option B is confusing Inventory is a current asset, but the specific standard RFA indicators specifically call out inventory movements and stock audit findings. Why C is correct This situation directly matches two distinct Red Flag criteria o Significant movements in inventory, disproportionately higher than the growth in turnover. o Critical issues highlighted in the stock audit report e.g., inflated stock statements to draw higher bank finance.