Question

    A firm has Total Current Assets of ₹160 lakh, Other

    Current Liabilities (excluding bank borrowing) of ₹40 lakh, and a Minimum Working Capital margin of 25%. As per the MPBF (Maximum Permissible Bank Finance) method (Tandon II), calculate the bank finance.
    A ₹90 lakh Correct Answer Incorrect Answer
    B ₹80 lakh Correct Answer Incorrect Answer
    C ₹70 lakh Correct Answer Incorrect Answer
    D ₹85 lakh Correct Answer Incorrect Answer
    E ₹100 lakh Correct Answer Incorrect Answer

    Solution

    Step 1: Calculate Minimum Working Capital Margin (MWCM) MWCM = 25% of TCA = 25% of ₹160 lakh = ₹40 lakh Step 2: Maximum Permissible Bank Finance (MPBF) As per Tandon Method II: MPBF = Total Current Assets - Other Current Liabilities - Margin So, MPBF = 160 lakh - ₹40 lakh - ₹40 lakh = ₹80 lakh

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