MPBF or Maximum Possible Bank Finance Tandon Committee Example :
Let total Current Assets of a company is s! "#$ lak%s and total Current Liability is also s! "#$ lak%! T%e current liability includes s%ort term bank borro&in's ofs! (#$ lak%s! )* Calculate MPBF usin' Tandon Committee recommendations Met%od-+ ,* Calculate MPBF usin' Tandon Committee recommendations Met%od-++ (* Calculate MPBF usin' Tandon Committee recommendations Met%od-+++ olution: Current assets. CA / "#$ Current Liability. Liability. CL / "#$ Current Liability excludin' bank 0nance / "#$ 1 (#$ / ,$$ o 2orkin' 2orkin' capital 3ap 42C3* / "#$ - ,$$ / (#$ 555!! 4a* 4)* Met%od 1 + Mar'in / ," 6 of2C3 / ,"6 of (#$ / 7$ MPBF / 2C3 1 Mar'in / (#$ 1 7$ / ,8$ Existin' bank borro&in' / (#$ 9ence excess bank 0nance / (#$ 1 ,8$ /7$ 4,* Met%od-++ Mar'in / ,"6 CA / ,"6 of "#$ / )$ 2orkin' capital 3ap42C3* / (#$ MPBF / 2C3 1 Mar'in / (#$ 1 )$ / ,,$ Existin' bank borro&in' / (#$ 9ence excess 0nance / (#$ 1 ,,$ / )$ +f bank borro&in' is reduced from (#$ to ,,$. current liability &ill be reduced from "#$ to "#$-)$ / ,$ 4CL* Current ratio after t%is c%an'e / CA;CL / "#$;,$ / ;( / )!((:) Bank
Core current asset is permanent component of current assets which are required throughout the year for a company to run continuously and to stay viable. Sometimes core current assets are also referred as “Hardcore Working Capital ”. These assets are not liquid and so when companies are in need of money, they initially sell off non-core assets (assets which are not important for continuous functioning of a business to raise money.
ay )$$ lak% is t%e core current asset of a company! o real current asset / "#$ 1 )$$ / #$ lak% Mar'in / ,"6 real CA / ,"6 of #$ / ))" 2orkin' capital 3ap42C3* / eal Current Asset 1 CL excludin' bank / #$ 1 ,$$ / ,#$ MPBF / 2C3 1 Mar'in / ,#$ 1 ))" / )" Existin' bank borro&in' / (#$ 9ence excess 0nance / (#$ 1 )" / ,)"
Bank
Example, :
Let total Current Assets of a company is s! "#$ lak%s and total Current Liability is also s! (#$ lak%! T%e current liability includes s%ort term bank borro&in's of s! )$$ lak%s and bills payable of ,)$ lak% and ot%er current liabilities of s! "$ lak% olution : 3ross &orkin' capital / CA / "#$ CL / (#$ >et &orkin' capital / CA 1 CL / ,$$ 2orkin' capital 'ap42C3* / CA 1 CL excludin' bank 0nance o 2C3 / "#$ 1 (#$ / ($$ Met%od + : Mar'in / ," 6 of 2C3 / ,"6 of ($$ / 8" Maximum possible bank 0nance4MPBF* / 2C3 1 Mar'in / ($$ 1 8" / ,," 9is existin' bank loan is only )$$ lak%. %is 0nance can be in creased up to ,," by 'i?in' additional 0nance of )," lak% Met%od ++: Mar'in / ,"6 of CA / ,"6 of "#$ / )$ MPBF / 2C3 1 Mar'in / ($$ 1 )$ / )#$ 9is present s%ort term bank loan is )$$ lak%.
o %e can be 'i?en furt%er 0nance of #$ lak% +n t%at case %is total CL &ill be (#$@#$ / ,$ +f CL / ,$ . CA;CL / "#$; ,$ / )!(( :)
