CMA related ratios

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Querist : Anonymous

Querist : Anonymous (Querist)

23 July 2010 expert,
For CMA related to CC/WC/Term loan which are the relevant ratios and what are their standards....ex. current ratios shld be around 1.33 to get loan.

thanks

Nitin

Nitin (Expert)

23 July 2010 Pl check interest coverage ratio,debt equity ratio,Total asset to outside liabilites,ROI, GP/NP ratio,networth etc.

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Querist : Anonymous

Querist : Anonymous (Querist)

24 July 2010 thanks! any idea about the standards for each one.

Nitin

Nitin (Expert)

24 July 2010 Actually the first point of consideration is that nature of industry/business cycle to understand before any standards can be applied for eg in a trading concern current ratio of 2:1 may be very perfect & more then 2:1 can show that business in not doing its work with full productivity but in a manufacturing concern the conclusion can be changed as they may have a bigger cycle from WIP to finished products & then to sell ,similarly in some trade there is a credit of 4-6 months also but their % of margin is high but in some industry it is 10-15 days as the margin of % is low.So as banks /FI analyse these ratio ,they always first understand the industry standards as in a trading concern 1-3% ratio of NP may be v good but for a manufacturing concern it may be too low .Hope you have got my point.

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Querist : Anonymous

Querist : Anonymous (Querist)

24 July 2010 thanks Nitin....could understand a little.

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