( This post explains, the difference between other current liabilities and the current liabilities for the purpose of working capital appraisal and items like contingent liabilities, netting of current liabilities and current assets.) The current liabilities are those dues, to be settled within 12 months from reporting date, including overdraft and loan installments payable within 12…
(This article identifies the non-current assets to be separated from current assets while appraising the working capital limits to borrower). The figures of ‘Current Assets’ appearing on the balance sheet is normally a consolidated figure of ‘Current Assets’ and ‘Other non-current Assets’. Hence, the Non-Current Asset items are to be separated from current assets and that only the…
(This article explains the meanings of current assets, fixed assets, intangible assets, share capital, reserve and surplus, long-term liabilities, current liabilities, contingent liabilities & assets.) A balance sheet is a financial statement of an entity which is prepared for reporting of financial position of the business as at a particular date. The balance sheet is so…
Funds flow statement takes both cash and non-cash items for accounting. Funds flow statement is used to examine the funds precisely available for working capital from long-term sources. It also enables assessment of an entity’s ability to meet long-term obligations. The funds flow takes place only when there is an increase or decrease in working capital…
[Cash Budget pattern of financing seasonal productions like sugar, tea and construction activities] The request for financial assistance from business enterprises dealing in seasonal products like sugar, tea, construction activities, film industries, order based activities etc. are facilitated by the banks through Cash Budget financing plans. In such pattern of business dealings, the requirement of…
(A manufacturing unit needs to hold the stock of raw material, work-in-process, finished goods for a length of time in the workplace before dispatching the final products to the customers.This article explains how to calculate holding period for stocks and book debts collection) In simple term, operating cycle means the length of time required to…
(Nayak Committee norms for computation of working capital limits) The term working capital means sum of the funds invested at various current assets used in the operating cycle, by the industrial and trading establishments. Operating cycle means the length of time required to convert ‘Non-Cash current assets’, (like raw material (RM), work in process (WIP), finished goods (FG),…
(This post explains the definitions of working capital , Operating cycle and various methods of working capital appraisal viz. Tandon’s first method, Tandon’s second method,Turnover method or Nayak committee norms, Cash budget method, Chore committee norms, Maximum permissible bank finance, Minimum permissible bank finance and Important things to note in assessment of working capital…
[The working capital requirement of industrial and trading establishments means the sum of the funds invested by them in various current assets (like raw material (RM), work in process (WIP), finished goods (FG), and the outstanding receivables on goods sold. The working capital facility is extended to a borrower by the banks will depend upon on…
Credit Appraisal is a knack of adapting certain precautions at the time of new sanction or renewal or enhancement of existing limit. Credit Appraisal revolves around the credit investigation to determine the economic and business environment in which prospective borrower is placed. The process involves assessment of honesty and integrity of the borrower, standing of the borrower,…