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C Working Capital Finance
What is working capital finance in the context of commercial banking?
Working capital finance refers to short-term credit facilities extended by banks to meet a borrower's day-to-day operational needs, covering the gap between current assets and current liabilities.
What is the Creditor Days formula used in working capital analysis?
Creditors divided by purchases multiplied by 365 days.
What is the Maximum Permissible Bank Finance (MPBF) concept?
MPBF is the maximum amount of bank credit permissible to a borrower for working capital, computed as 75% of the net working capital gap (current assets minus current liabilities excluding bank borrowings), as recommended by the Tandon Committee.
What is the concept of 'Margin' in the context of working capital bank finance?
Borrower's own contribution to current assets, reducing bank exposure.
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