Determination of loan amount

Rohit Shah (CA Job) (24 Points)

28 June 2013

Could anyone tell me the procedure to calculate the "Required Turnover of the Company",if it requires a loan of Rs 15 Cr

Thanks &Regards

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sachin (student) (221 Points)
Replied 29 June 2013

You could use theMaximumPermissible Bank Finance method which consists of two method-

1) Turnover method

2) Working Capital Method

In case of Turnover Method- finace amount would be calculated as follows

A)25% of Turnover

B) 5% Of Turnover( Margin Kept by bank)

C)Actual Net Working Capita l(NWC)

d)A-B

e)A-C

F) Whichever is Lower of d or e---(Loan Amount)

In Case of working capital method finance amont would be as follows:

A)Total Current Asset

B) Total Current Liabilities (Excluding Bank Borrowings)

C) Working Capital(A-B)

D) 25% of working Capital

E)Actual Net Working Capital

F) C-D

G) C-E

H) Whichever is Lower of F or G----(Loan Amount)

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