The following data pertain to Premier Wires Ltd for the financial year 2024-25 (figures ₹ in lakh) Creditors for trade ₹ 375 Creditors for expenses ₹ 25 Other current liabilities ₹ 200 (Other than bank borrowings) Existi

Calculation of Maximum Permissible Bank Finance (MPBF) as per Tandon Committee recommendations: Step 1: Calculate Total Current Assets Raw materials & WIP: ₹ 840 lakh Finished goods: ₹ 360 lakh Book debts: ₹ 220 lakh Bank fixed deposits: ₹ 60 lakh Total Current Assets = 840 + 360 + 220 + 60 = ₹ 1480 lakh Step 2: Calculate Current Liabilities (other than bank borrowings) Creditors for trade: ₹ 375 lakh Creditors for expenses: ₹ 25 lakh Other current liabilities: ₹ 200 lakh Total Current Liabilities (excluding bank borrowings) = 375 + 25 + 200 = ₹ 600 lakh Step 3: Calculate Working Capital Gap Working Capital Gap = Total Current Assets - Total Current Liabilities (excluding bank borrowings) Working Capital Gap = 1480 - 600 = ₹ 880 lakh Step 4: Calculate Minimum Net Working Capital (25% of Current Assets) Minimum Net Working Capital = 25% of Total Current Assets Minimum Net Working Capital = 0.25 × 1480 = ₹ 370 lakh Step 5: Calculate Maximum Permissible Bank Finance (MPBF) MPBF = Working Capital Gap - Minimum Net Working Capital MPBF = 880 - 370 = ₹ 510 lakh Step 6: Calculate Additional Bank Finance (considering existing borrowings) MPBF calculated: ₹ 510 lakh Less: Existing bank borrowings: ₹ 50 lakh Additional Bank Finance = 510 - 50 = ₹ 460 lakh So, the company can go for additional bank finance (as per Tandon Committee norms) of ₹ 460 lakh. Verification of Current Ratio after additional finance: Total Current Liabilities (including new bank finance) = Existing Current Liabilities (excluding bank borrowings) + MPBF Total Current Liabilities = 600 + 510 = ₹ 1110 lakh Current Ratio = Total Current Assets / Total Current Liabilities Current Ratio = 1480 / 1110 ≈ 1.33:1 This ratio matches the norm of 1.33, indicating the calculation is consistent with the Tandon Committee recommendations.