01 April 2021
1.what is difference between actually and estimated and projected balance sheet and increased percentage actually and estimated and projected 2.drawing power calculations formula 3.dufference drawing power and sanctions limit.
10 July 2024
Let's address each of your questions one by one:
### 1. Difference Between Actual, Estimated, and Projected Balance Sheet
- **Actual Balance Sheet**: This is the financial statement that presents the actual financial position of a company at a specific point in time. It reflects real transactions and events that have occurred up to the date of preparation.
- **Estimated Balance Sheet**: An estimated balance sheet is a forecast or prediction of the financial position of a company based on known factors and assumptions. It may be prepared for budgeting, planning, or decision-making purposes. Estimates are used when actual data is not yet available but can be reasonably predicted.
- **Projected Balance Sheet**: A projected balance sheet is similar to an estimated balance sheet but typically extends further into the future. It forecasts the financial position of a company based on expected future events, changes in operations, or strategic initiatives. It helps in long-term planning and forecasting.
**Increased Percentage:** - The "increased percentage" likely refers to the growth or change in financial metrics (like revenue, assets, liabilities, etc.) from one period to another, whether it's actual, estimated, or projected. For example, if revenue is projected to increase by 10% next year, that's the increased percentage.
### 2. Drawing Power Calculation Formula
- **Drawing Power**: Drawing power refers to the maximum amount that can be withdrawn from a bank's sanctioned credit facility by a borrower. It's calculated based on the value of the security provided and the terms of the lending agreement.
- **Formula**: The formula to calculate Drawing Power typically involves: - Determining the value of the security (e.g., stocks, receivables, etc.). - Applying a margin (also known as a margin ratio or margin percentage) specified by the bank. The margin is used to safeguard against fluctuations in the value of the security.
**Example Formula**: Drawing Power = Value of Security × Margin Percentage
### 3. Difference Between Drawing Power and Sanction Limit
- **Drawing Power**: As mentioned, drawing power is the maximum amount that can be withdrawn by a borrower against a sanctioned credit facility, based on the value of the security and the margin set by the bank.
- **Sanction Limit**: Sanction limit, on the other hand, is the maximum amount of credit that a bank or financial institution approves or sanctions to a borrower. It represents the total credit facility available to the borrower.
**Key Differences**: - **Purpose**: Drawing power is used to determine the actual amount that can be withdrawn at any given time, based on the value of collateral. Sanction limit is the total amount sanctioned by the bank, which may or may not be fully utilized.
- **Calculation**: Drawing power is calculated based on the value of security and margin percentage. Sanction limit is determined by the bank based on various factors including creditworthiness, financial statements, and collateral.
In summary, drawing power is the operational limit for withdrawals against a sanctioned credit facility, while the sanction limit is the total amount of credit approved by the bank. Understanding these concepts is crucial for managing financial liquidity and credit facilities effectively.
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