Gajamukha Fuel Injections Pvt Limited is a unit enjoying FBWC Limit of ₹ 50 Lakhs. Margin stipulated against Stocks is 25% and for Book debts is 50% as per the sanctioned terms and Conditions. Stale stocks and book debts

CS Professional · Banking - Law & Practice · PYQS · June 2025
Gajamukha Fuel Injections Pvt Limited is a unit enjoying FBWC Limit of ₹ 50 Lakhs. Margin stipulated against Stocks is 25% and for Book debts is 50% as per the sanctioned terms and Conditions. Stale stocks and book debts outstanding beyond 90 days are not considered for DP calculation. The Stock statement dated 31.01.2025 is received on 05.02.2025. As per the Stock statement, Value of Stocks is showing ₹ 45 Lakhs (₹ 5 lakh stocks are old) and value of Book Debts is ₹ 30 Lakhs of which ₹ 10 lakh worth debtors are 4 months old. Value of Sundry Creditors for purchases is ₹ 10 lakhs. The Borrower has also advised outstanding LC Backed Bills discounted of ₹ 10 lakhs. Based on these facts, calculate the Drawing Power for the company as per the given stock statement ?

Answer & Explanation:

Value of stock as per stock statement ₹ 45 lakhs Less old stock ₹ 5 lakhs Value of stocks ₹ 40 lakhs Less stock on credit ₹ 10 lakhs Therefore, value of stock eligible for DP calculation ₹ 30 lacs Margin on stock 25% of ₹ 30 Lakh = ₹ 7.50 lacs Therefore, Funding-on Stock = ₹ 30 - ₹ 7.50 = ₹ 22.50 lakhs Book debts value ₹ 30 lacs Less old debts ₹ 10 lacs Eligible book debts for DP calculation. ₹ 20 lakhs Less margin 50% of ₹ 20 lakh = ₹ 10 lakhs DP out of book debts ₹ 10 lakhs Total DP = ₹ 22.50 + ₹ 10 = ₹ 32.50 lakhs Note: since BD facility is backed by LC, not taken in DP calculation.

Topics: Working Capital Management

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