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.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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