Project finance query

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Dear all,

I come across with the following point while making CMA Report form IV i.e. COMPARATIVE STATEMENT OF CURRENT ASSETS AND CURRENT LIABILITIES.

Can anyone please tell me what is the interpretation of Raw material Month's consumption.

The formula is used is as follows:

Raw material Cl. Stock

Raw material Consumption/12

 

 

A. CURRENT ASSETS                
1. Raw materials (incl. stores & other items                
  used in the process of manufacture)                
  a. Imported   0.00 0.00 0.00 0.00 0.00 0.00 0.00
    Month's Consumption                
  b. Indigenous   209.32       277.93      291.46       269.57      320.25     343.12     366.00    
    Month's Consumption   (8.34) (7.59) (8.06) (2.47) (2.47) (2.47) (2.47)

 

Replies (1)

Raw Material Month's Consumption is determined to calculate the quantity of Closing Stock of  Raw Material maintained compared to the quantity of rawmaterial consumed in term of months. It shows how many months will the closing stock be able to support Production/Operations if no more material is purchased.

Moreover It is used to asses the banking limits which is being applied for. If a company shows that it is maintaning more closing stock then its cash is blocked in it and it gives company more cushion in terms of Current Asset and helps in increasing the amount of Cash Credit limit applied for.

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