J Industries Ltd wants to fund its new capital acquisition and working capital through bank finance. The cost of the expansion plan is given below: Plant and machinery: Rs. 500 lakh Building and site development: Rs. 75 lakh Other expenditure: Rs. 25 lakh The company requires current assets of Rs. 620 lakh during this period, the split up for which is as follows: Inventory: Rs. 300 lakh Receivables: Rs. 180 lakh Cash and others: Rs. 140 lakh Fill in the following table to assess the structure of working capital finance, if current liabilities amount to Rs. 70 lakh and the bill finance required is Rs. 40 lakh. Assume the bank wants a margin of 25 per cent for all the modes of financing it extends to the borrower. Margin on capital expenditure will be @ 25 per cent on long-term assets. Long-term assets will include only specific immoveable property being considered for expansion = Margin = 0.25? (A) = Bank finance for capital expenditure = (A) - (B) = Permissible bank finance (PBF) for working capital = 0.75? (current assets - current liabilities) = Margin for working capital = Rs. 620 less (D) Structuring limits WCDL = 0.8? (D) CC = 0.2? (D) = amount of CC available for inventory Balance of inventory to be financed = inventory - (G) = Amount of WCDL used for bills financing = Rs. 40 lakh Hence, WCDL available for funding remaining inventory and other debtors = (F) - (I) =
J Industries Ltd wants to fund its new capital acquisition and working capital through bank finance.
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