CA Intermediate · Financial Management and Strategic Management · Financing of Working Capital
Kaveri Ltd has current assets of ₹1,00,00,000, of which ₹20,00,000 are core current assets, and current liabilities other than bank borrowings of ₹25,00,000. Under Tandon Committee Method 3, the MPBF is:
MPBF is ₹35,00,000. Under Method 3, deduct core current assets (₹20 lakh) from current assets, leaving ₹80 lakh; take 75% (₹60 lakh) and subtract other current liabilities of ₹25 lakh.
- A₹35,00,000Correct
- B₹55,00,000
- C₹50,00,000
- D₹30,00,000
Explanation
Method 3: 75% of (current assets - core current assets) less other current liabilities. Real current assets = 80,00,000; 75% = 60,00,000. MPBF = 60,00,000 - 25,00,000 = 35,00,000. The ₹55,00,000 option wrongly applies 75% to the core-adjusted figure but then deducts nothing for core assets, using 75% of 1,00,00,000 less 20,00,000 style errors.
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