A Limited Company enjoying CC Sanction Limit of ₹14,00,000 from M/s XYZ Banks. The details of Stock and Book Debts Statement as at the end of 31st March. 2024 are as under: The Margins and other conditions as per Sanctio

CS Professional · Banking and Insurance - Laws and Practice · PYQS · June 2024
A Limited Company enjoying CC Sanction Limit of ₹14,00,000 from M/s XYZ Banks. The details of Stock and Book Debts Statement as at the end of 31st March. 2024 are as under: The Margins and other conditions as per Sanction letter issued by the Bank is as follows: (a) On Stocks = 25% (b) On Debtors = 50% (c) Debtors are to be considered by the Bank is up to 90 Days (d) Dead Stocks/Non-moving Stocks Not considered for Finance. Total Stocks ₹14,00,000, Total Creditors ₹4,00,000 (of which creditors for expenses is ₹1,00,000), Total Debtors ₹5,00,000 of which debtors aged more than 90 days is ₹1,00,000, Dead Stocks/ Non-moving Stocks in Total Stocks is ₹1,00,000. Calculate the Drawing Power for March, 2024.

Answer & Explanation:

Drawing Power Calculation: A Total Stocks ₹14,00,000 B Less: Creditors (Who Supplied the Stocks) (₹400,000-₹1,00,000) ₹3,00,000 C Net Paid Stock (A-B) ₹11,00,000 D Less: Non-movable Stocks ₹1,00,000 E Stocks Available for Finance (C-D) ₹10,00,000 F Less: Margin on stock @25% (i.e. 25% of ₹10,00,000) ₹2,50,000 G Drawing Power (DP) on Stocks (E-F) ₹7,50,000 H Total Debtors ₹5,00,000 I Less: Debtors > 90 days ₹1,00,000 J Net Debtors for DP (H-I) ₹4,00,000 K Less: Margin on Debtor @50% (i.e. 50% of ₹4,00,000) ₹2,00,000 L Drawing Power (DP) on Debtor (J-K) ₹2,00,000 M Total Drawing Power (G+L) ₹9,50,000 Drawing Power for the month of March, 2024 is ₹9,50,000/-

Topics: Banking Operations

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