Balance sheet of GKJ Ltd. for the year ended 31st March, 2024 is given below : Liabilities Amount (₹ lakh) Assets Amount (₹ lakh) Equity Share ₹ 10 each 200 Fixed Assets 500 Retained Earnings 200 Raw Materials 150 11% De

CS Professional · Strategic Management and Corporate Finance · PYQS · June 2024
Balance sheet of GKJ Ltd. for the year ended 31st March, 2024 is given below : Liabilities Amount (₹ lakh) Assets Amount (₹ lakh) Equity Share ₹ 10 each 200 Fixed Assets 500 Retained Earnings 200 Raw Materials 150 11% Debentures 300 W.I.P. 100 Public Deposits (Short-term) 100 Finished goods 50 Trade Creditors 80 Debtors 125 Bills Payable 100 Cash/Bank 55 980 980 Calculate the amount of maximum permissible bank finance under three methods as per Tandon Committee lending norms. The total core current assets are assumed to be ₹ 30 lakh.

Answer & Explanation:

Answer 5(a) Current Assets = Raw Material + W.I.P + Finished Goods + Debtors + Cash/Bank Current Assets = ₹ 150 Lakh + ₹ 100 Lakh + ₹ 50 Lakh + ₹ 125 Lakh + ₹ 55 Lakh = ₹ 480 lakh Current Liabilities = Public Deposits (Short-term) + Trade Creditors + Bills Payable = ₹ 100 Lakh + ₹ 80 Lakh + ₹ 100 Lakh = ₹ 280 lakh Maximum Permissible Banks Finance under Tandon Committee Norms Method I Maximum Permissible Bank Finance = 75% of (Current Assets - Current Liabilities other than bank borrowings) = 75% of (₹ 480 Lakh - ₹ 280 Lakh) = ₹ 150 lakh Method II Maximum Permissible Bank Finance = (75% of Current Assets) - Current Liabilities = (75% of ₹ 480 Lakh) - ₹ 280 Lakh = ₹ 80 lakh Method III Maximum Permissible Bank Finance = 75% of (Current Assets - Core Current Assets) - Current Liabilities = 75% of (₹ 480 Lakh - ₹ 30 Lakh) - ₹ 280 Lakh = ₹ 57.5 lakh

Topics: Corporate Finance

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