Working Capital Finance
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Define Gross Working Capital (GWC) and Net Working Capital (NWC).
GWC = Total Current Assets. NWC = Current Assets − Current Liabilities.
What is the Working Capital Cycle (WCC)?
Time from purchasing raw materials to collecting cash from sales; also called Operating Cycle.
What is the minimum Current Ratio required by banks under Tandon's 2nd Method?
Minimum Current Ratio of 1.33 (or 1.25 under Nayak/Projected Turnover Method).
State the Tandon Committee's First Method lending requirement.
Borrower must bring minimum 25% of Working Capital Gap (WCG) from long-term sources.
State the Tandon Committee's Second Method lending requirement.
Borrower must bring minimum 25% of Total Current Assets (TCA) from long-term sources.
What does Nayak Committee prescribe for working capital requirement?
Working Capital Requirement = 25% of Annual Projected Turnover for MSMEs.
What is Bank Finance limit under Nayak Committee Method?
Bank Finance = 20% of Annual Projected Turnover; Borrower's Margin = 5%.
When is Cash Budget Method used for working capital assessment?
For seasonal/irregular cash flow industries: sugar, tea, construction, software, film production.
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