The following data pertains to XYZ Ltd: Projected Sales ₹20,00,000, Creditors ₹3,00,000, Bank Borrowings ₹3,30,000, Current Assets ₹7,40,000. Assess the Working Capital requirement of XYZ Ltd. using the method given by N

Net Working Capital = Current Assets - Current Liabilities i.e Bank Borrowings & Creditors Net Working Capital = ₹7,40,000 - ₹6,30,000 = ₹1,10,000 Minimum Working Capital required i.e 25% of Sales = 25% of ₹20,00,000 = ₹5,00,000 Margin or Minimum Borrower's contribution i.e. 5% of projected sales = 5% of ₹20,00,000 = ₹1,00,000 Margin or Net Working Capital whichever is higher to be deducted from 25% of Sales i.e. ₹5,00,000 - ₹1,10,000 = ₹3,90,000 So, maximum permissible finance as per Nayak Committee's recommendation in the case under consideration shall be ₹3,90,000.