Working Capital - Definition

Funds deployed for managing business operations.

It is also called revolving or circulating capital or short-term capital
 Working Capital Assessment Methods
Computation of Maximum Permissible Bank Finance
 Maximum permissible bank finance – based on recommendation of
Tandon Committee
 3 Methods of calculation

MPBF = 75% ( Current Asset – Current Liabilities other than Bank

1st method borrowings)

MPBF = (75% of Current Asset – Current Liabilities other than Bank

2nd method
borrowings)

MPBF = 75% of (Current Asset – Core Current Asset ) - Current

3rd method
Liabilities other than Bank borrowings

3
 Working Capital Assessment Methods

 Maximum permissible bank finance – based on

recommendation of Nayak Committee

• Working capital requirement = 25% of the projected

Turnover
• Promoter Contribution (Margin) = 5% of the Turnover
Turnover Method
• Maximum Bank Finance = 20% of the Turnover
• This method was originally used to assess requirement of
small scale industries.