On the basis of the following information, calculate the limit for Letter of Credit (LC) for the financial year 2025-26 for Kansara (India) Ltd., Kochi. Estimated raw materials (procured from Faridabad) to be purchased i
CS Professional · Corporate Funding & Listings in Stock Exchanges · PYQS · June 2025
On the basis of the following information, calculate the limit for Letter of Credit (LC) for the financial year 2025-26 for Kansara (India) Ltd., Kochi. Estimated raw materials (procured from Faridabad) to be purchased in 2025-26 = ₹ 180 crore Estimated purchase of raw materials under LC during the year = ₹ 60 crore Lead time = 10 days Transit period = 20 days Credit (usance) period available = 2 months.
Answer & Explanation:
Total raw materials (procured from Faridabad) purchased during 2025-26 = ₹180 crore Annual consumption of raw materials purchased under LC = ₹60 crore Average monthly purchase of raw materials under LC = ₹60 crore / 12 = ₹5 crore Lead time = 10 days Transit time = 20 days Credit (Usance) period available = 2 months Total period = 10 days + 20 days + 2 months = 3 months (Assuming 30 days in a month) Hence requirement of LC for the year = ₹5 crore x 3 months = ₹15 crore
Topics: Corporate Funding
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