Working capital gap

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 June 2013 respected sir,
please some one clarify the concept "working capital gap" and how to caliculate it and significance of working capital gap in sanction of bank loans.
thanking you.

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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23 June 2013 working capital GAP and permissible finance in two lending methods, first method of
lending will allow the MPBF 75% of the net working capital GAP which is Current assets
less current liabilities, Second method of lending will allow the MPBF 75 % the current
assets less current liabilities. So only the MPBF limit is the cash credit component of the borrower which generally known Drawing power (DP Limit). So this is very important
statement which decide the borrower`s borrowing limit from the bank