PART-A

Answer all the questions. Each question carries one mark.

(1X50=50)
1. Advances to general retail trade will be classified as priority sector
if
A) Investment in asset does not exceed Rs10lacs
B) Investment in assets does not exceed Rs20lacs
C) Loan amount does not exceed Rs10lacs
D) Loan amount does not exceed Rs20lacs
2. How you will classify a loan of Rs10lacs given to a farmer against
the hypothecation of paddy who has not been given crop loan and
is payable within a period of 12 months?
A) Other priority sector finance
B) Direct finance to agriculture
C) Indirect finance to agriculture
D) Non-priority sector finance
3. Tamilnad Mercantile bank has financed Rs50lacs to borrower for
the retail sale of cattle feed. How this loan will be classified?
A) Direct agriculture finance
B) Indirect finance to agriculture
C) Retail trade
D) Non priority finance
4. What is the target for finance to weaker section?
A) 15% of the priority sector credit
B) 10% of the ANBC
C) 10% of the priority sector credit
D) 15% of the ANBC
5. What is the income ceiling in rural areas for advances under DRI
scheme?
A) Rs24000
B) Rs6400
C) Rs18000
D) Rs7200
6. What is the risk weight for loans guaranteed by State Government?
A) 20%

B) 50%
C) 0%
D) 100%
7. What is the Tier 1 CRAR is encouraged to be maintained in
India?
A) 4%
B) 8%
C) 6%
D) 9%
8. Basel Committee recommendations are binding on which of the
following countries?
.
A) All countries of the world
B) Only G 10 Countries
C) All European and Asian countries
D) USA &Canada
9. Which of the following exposure is not exempted from
single/borrower group exposure limit?
A) Rehabilitation of Sick/Week Industrial Units.
B) Food Credit
C) Exposure guaranteed by the Government of India.
D) Exposure guaranteed by the State Governments
10. What is the prudential exposure limit in respect of infrastructure
projects for borrower group?
A) 15%
B) 20%
C) 40%
D) 50%
11. Prepaid insurance is classified as
A) Current liability
B) Non-Current asset
C) Current asset

D) Intangible asset
12. Contingent liabilities are shown in the balance sheet under
A) Foot Note
B) Current Liabilities
C) Provisions
D) Accrued Dues
13. If the current ratio of a concern is 1, what is the networking
capital of the concern?
A) Positive
B) Negative
C) NIL
D) Cannot be determined
14. Which one of the following is not a quick asset?
A) Government Bond
B) Book Debts
C) Advance for supply of raw materials
D) Inventories
15. The closing stock of raw material is Rs50lacswhich is double the
amount of opening stock. Raw material purchased during the year is
Rs120lacs.What is the raw material consumed?
A) 145lacs
B) 95lacs
C) 170lacs
D) 70lacs
16. Profit made and ploughed back to the business will certainly
increase
A) Cash balance
B) Net worth
C) Net working capital
D) Liquidity
17. The following is not a source of fund
A) Depreciation
B) Sale of assets
C) Issue of bonus shares
D) Issue of rights share

18. The second method of lending prescribes that contribution from

long term sources for working capital should be25% of
A) Working capital gap
B) Net working capital
C) Chargeable current assets
D) Total eligible current assets
19. Who will sign documents on behalf of the company while raising
a loan?
A) Managing Director
B) Executive director
C) Official authorized by Board of Directors through
resolution
D) At least 2 directors where loan is Rs10cr and above
20. The documents not governed by Indian Stamps Act1899 (Central
jurisdiction) are
A) Guarantee bond, mortgage deed
B) Life policies, shares, debentures
C) Letters of credit and bill of lading
D) Promissory notes, bills of exchange, cheques, Hundies
21. On which of the following documents, the stamp duty payment will
not be different in different States in India (exclude J&K)
A) Power of attorney
B) Partnership deed
C) Share transfer form
D) Mortgage deed
22. The maximum amount that can be covered under the guarantee
scheme of CGTMSE is

A) 25lacs
B) 50lacs
C) 75lacs
D) 100lacs
23. In respect of working capital limit, the CGTMSE Guarantee cover is
available to a maximum period of
A) 5years
B) 1years
C) 2years
D) No such condition
24. In case of delayed payment for supplies made by a micro/small
enterprise the interest to be paid for the delayed period will be at the
following rate.
A) SBI BPLR
B) Base rate plus 6%
C) Three times the bank rate
D) 18%
25. What is the margin, party is required to bring in the projected
turnover method for assessing working capital?
A) 25% of the working capital gap
B) 25% of the total current asset
C) 25%of the total current liability
D) 5% of the projected turnover
26. Drawing power is equal to
A) Paid stock minus stipulated margin or sanctioned
limit whichever is less
B) Paid stock minus stipulated margin
C) Available stock minus stipulated margin
D) Available stock minus stipulated margin or sanctioned
limit whichever is less

27. What is the celling for land holding for Small farmers?
A) Irrigated land not exceeding 2.5 acres or dry land not
exceeding 5 acres
B) Irrigated land not exceeding 1.25 acres or dry land not
exceeding 2.5 acres
C) Irrigated land not exceeding 5 acres or dry land not
exceeding 10 acres
D) Irrigated land not exceeding 1 acres or dry land not
exceeding 2acres
28. Which one of the following is not a measure of liquidity?
A) Net working capital
B) Current Ratio
C) Quick Ratio
D) Net worth
29. What should be the maximum exposure of Banks to capital market in
all forms?
A) Should not exceed 40% of its own capital as on 31st of
previous year.
B) Should not exceed 40% of its own net worth as on 31st
of previous year.
C) Should not exceed 10% of its own net worth as on
previous year.
D) Should not exceed 10% of its own capital as on previous
year
30. What is the maximum amount of loan to individual against the
security of de-mat shares?
A) 20lacs
B) 10lacs
C) 5lacs
D) 25lacs
31. The adjusted Net Bank credit means the Net Bank Credit plus the
following.
A) FCNR Deposits
B) Investment in non SLR bonds in HTM category
C) Investments in both SLR and Non SLR bonds

D) Credits given to banks

32. Which of the following priority sector targets is not applicable for
domestic banks?
A) Overall target-40% of ANBC
B) Weaker section -10% of ANBC
C) Agriculture lending -18% of ANBC
D) Micro and small enterprises -10%
33. Y issued two cash receipts of Rs900 and Rs9000.On these the stamp
duty payable is
A) Rs1 on each of them
B) Rs1 on 1st and no duty on the 2nd
C) Rs1 on 2nd and no duty on the 1st
D) Nil as no duty is payable on receipts up to Rs10000
34. While getting loan documents signed, the adhesive stamps are
neither cross signed by the
the borrower nor they are cancelled
A) Since documents are properly stamped there is no deficiency
B) Since documents have been signed by authorised signatories,
no deficiency
C) Since documents have been executed on proper forms, there is
no deficiency
D) Since the stamps have not been cancelled, the documents
would be treated as
unstamped
35. Charge on Life insurance policy is created by way of
A) Pledge
B) Hypothecation
C) Assignment
D) Lien
36. Current assets of a company are 1000lac and other current liabilities
Rs200lacs.What shall be the amount of permissible bank finance
(MPBF) as per 2nd method of lending as suggested by Tandon
Committee?
A) Rs800lac
B) Rs600lac
C) Rs750lac

D) Rs550lac
37. In the first method of lending as recommended by Tandon
Committee, the net working capital requirement is 25% of
A) Working capital gap
B) Total current assets required
C) Working capital required
D) Current liabilities
38. Sales of an MSE unit for the previous year were Rs400lac and
projected at RS500lac for next year. As per Nayak Committee, the level
of minimum bank working capital limits to be sanctioned would be
A) Rs475lac
B) Rs100lac
C) Rs75lac
D) Rs125lac
39. Credit Bank sanctioned cash credit limit of Rs300lac in favor of an
SSI unit dealing with them for the coming year. What is the level of
projected sale of the firm?
A) Rs600lac
B) Rs800lac
C) Rs1500lac
D) Rs1200lac
40. The debtors are Rs.600 lakhs as on 31.03.2012.The credit sale is
Rs.14400 lakhs. Then the credit allowed in days is
A) 15 days
B) 30 days
C) 6/144days
D) 24days
41. Pick the odd man out
A) Goodwill
B) Loss
C) Profit
D) Preliminary expenses
42. Out of the total advances to MSME, how much percentage of the
advance should go to micro enterprises?
A) 60%

B) 40%
C) 20%
D) 10%
43. Collection period of receivables is expressed with reference to
A) Cost of sale
B) Cost of production
C) Sale
D) Stock in process
44. When a borrowing unit is fitted in method II, its current ratio will be
A) Maximum1.33
B) Minimum1.33
C) Maximum 1.25
D) Minimum 1.25
45. In case of enterprises engaged in service activity, it will be classified
as micro unit if its investment in equipment does not exceed Rs---A) 25lacs
B) 5lacs
C) 10lacs
D) 20lacs
46. Enterprises engaged in service activity will be classified as medium
unit if its investment in equipment is more than Rs2crores but does not
exceed Rs------A) 1crore
B) 5crore
C) 25lacs
D) 2crore
47.In case of delay in making payment by its buyer the micro, small
enterprises which has supplied the goods can file an application with the
A) Micro Small Enterprises Facilitation Council
B) Ombudsman
C) Advisory committee
D) Industry Facilitation Council
48. For assessing working capital requirement for seasonal industries
,the following method is adopted
A) MPBF Method

B) Turnover method
C) Cash budget method
D) Any method can be adopted
49. Following advance is not considered as advance to weaker section
A) Scheduled casts and schedule tribes
B) Beneficiaries of DRI Scheme
C) Artisans, village and cottage industries where individual
credit limits do not exceed Rs100000
D) Beneficiaries of SGSY
50. Claim under CGTMSE for loans up to 5lacs is
A) 85%
B) 80%
C) 75%
D) 100%

PART-B
Answer all the questions. Each question carries TWO marks.
(5X2=10)
1. What is the investment limit for micro, small, medium
manufacturing enterprises?
2. What are the three liquidity ratios? And furnish the formula for
calculating them.
3. What is the turn over method of assessing working capital limit?
4. Which are the sources of working capital?
5. What is the target for overall priority sector advances, agriculture
advances, and weaker section advances?
PART-C
Answer all the questions. Each question carries FIVE
marks.(5X4=20)
6. Examine the following Balance Sheet to answer the questions
thereafter.
LIABILITIES
Equity Capital

ASSETS
200 Gross Block
1000

Preference Capital

100 Less Dep.

Term Loan

600 Net Block

800

Bank O.D.

400 Inventory

300

Sundry Creditors

100 Receivable

150

Invest.

200

in

Govt.

50

Securities
Preliminary Expenses
TOTAL

1400 TOTAL

100
1400

Compute the following ratios

a. Debt Equity Ratio
b. Tangible Net worth
c. Net Working Capital
d. Current Ratio
e. Quick Ratio

7. While analyzing the balance sheet, the assets and liabilities are
grouped into how many categories? Which are they?
8. Explain the salient features of CGTMSE guarantee scheme.
9. Explain the salient features of DRI scheme.

PART-D
Answer all the questions. Each question carries TEN marks.
(2X10=20)
10. Please classify the following items into Assets & Liabilities
appropriately and draw a Balance Sheet.
Sl.
No
1.
2.
3
4.
5.
6.
7.
8.
9.
10.
11.
12
13.
14.
15
16

Description
Consumable Stores and Spares
Provision for Taxation
Prepaid Expenses
Preliminary and Pre-Operative Expenses
Reserves and Surplus
Furniture & Fixtures
Investment in Subsidiaries
Sundry Debtors outstanding less than 365
days
Bill Receivables
Debtors outstanding for more than 365 Days
Stock in Process
Debentures
Unsecured Loans payable after 12 months
Bank Overdrafts
Goodwill
Installment of Term Loan payable in 12

Amount
10
4
10
4
8
6
4
20
10
10
10
20
10
20
6
10

17
18.
19.
20.
21
22
23
24
25
26
27
28
29
30

months.
Term Loan excluding installment payable in
12 months
Paid Up Capital
Authorized Capital
Profit & Loss A/c (Debit Balance)
Raw Material
Bills Payable
Provision for Dividend
Land and Buildings
Cash and Bank Balance
Banks Cash Credit Limit outstanding
balance
Sundry Creditors
Plant and Machinery
Investment in Shares (Non Govt. Security)
Finished Goods

20
32
100
10
20
20
10
40
10
30
16
14
6
10

11. From the following balance sheets, compute the changes in the
Assets and Liabilities and classify them as sources/uses:
Balance Sheet of Firm A
Rs in Lakhs
Rs in Lakhs
Liabilities
Share Capital
Reserves & Surplus
Long Term Debts
Debentures

Assets
2006 2007
60
60 Fixed Assets (Net )
60
70
Long term
40
50 investments
60
70

2006 2007
240 260
10

10

12
70
72
6
10

17
65
86
10
12

420

460

Term
Loans
Current Liabilities and
Provisions
Loans and Advances
(Bank Borrowings )
Sundry creditors
Provisions

100
70
30

420

Current Assets
110
Cash and Bank
balances
75
Debtors
25
Inventories
Pre-paid
expenses
Other Current Assets
460

Other information: Accumulated Depreciation during the year ending

2006 was Rs160 lakhs and Rs180 lakhs during the year ending 2007.
Comment on Net Working Capital and the surplus/deficit of the sources
and uses.
******

MANIPAL GLOBAL EDUCATION

MCQ ANSWER KEY SHEET
Institute : Baroda Manipal School of Banking, MUBC, Bangalore
Course: Diploma In Banking for Promoted
Term: II
Officers of Tamilnad Mercantile Bank Limited
Subject Name: Credit Management
Subject Code:
MTB206
Examination Month & Year : February 2013
Set No: 2

Question Answ Question Answe Question Answer

No.
er
No.
r
No.
Key
Key
Key
1
D
21
C
41
C
2
B
22
D
42
A
3
D
23
A
43
C
4
B
24
C
44
B
5
C
25
D
45
C
6
A
26
A
46
B
7
C
27
A
47
A
8
B
28
D
48
C
9
D
29
B
49
C
10
D
30
A
50
A
11
C
31
B
12
A
32
D
13
C
33
C
14
D
34
D
15
B
35
C
16
B
36
D
17
C
37
A
18
D
38
B
19
C
39
C
20
A
40
A

MANIPAL GLOBAL EDUCATION

DTQ ANSWER KEY SHEET
Institute : Baroda Manipal School of Banking, MUBC, Bangalore
Course: Diploma In Banking for Promoted
Term: II
Officers of Tamilnad Mercantile Bank Limited
Subject Name: Credit Management
Subject Code:
MTB206
Examination Month & Year : February 2013
Set No: 2

PART-B
Answer all the questions. Each question carries TWO marks.
(5X2=10)
1. What is the investment limit for micro, small, medium manufacturing
enterprises?
Answer
Type of
Criterion
Micro
Small
Medium
activity
Manufacturin Investment Maximu Above
Above
g
in plant
m
Rs25lacto Rs5crores
&Machiner Rs25lacs Rs5crores to
y
Rs10crore
s
Servicing
Investment Maximu Above
Above
in
m
Rs10lac
Rs2crores
equipment
Rs10lacs toRs2crore to
s
Rs5crores
2. What are the three liquidity ratios? And furnish the formula for
calculating them.

a. Current ratio=current asset/current liability

b. Quick ratio=current assets-inventories/current liability
c. NWC=Current assets-Current liability
3. What is the turn over method of assessing working capital limit?
Answer
In the turn over method of assessing working capital, working
capital assessment is assessed at 25% of the reasonable level of
projected sales and 5% of the projected sales need to be brought by
the party as NWC and the remaining 20% is eligible bank finance.
4. Which are the sources of working capital?
a. Other current liabilities such as sundry creditors ,provisions
etc
b. Net working capital being the resources brought by the
borrower from long term sources
c. Bank finance
5. What is the target for overall priority sector advances, agriculture
advances, and weaker section advances?
a. Overall priority sector is 40% of ANBC or the credit
equivalent of the off-balance sheet exposure whichever is
higher.
b. Agriculture advances-18% of ANBC or the credit equivalent
of the off-balance sheet exposure whichever is higher.
c. Weaker sections-10% of ANBC or the credit equivalent of
the off-balance sheet exposure whichever is higher.

PART-C
Answer all the questions. Each question carries FIVE
marks.(5X4=20)
6. Examine the following Balance Sheet to answer the questions
thereafter.
LIABILITIES

ASSETS

Equity Capital

200 Gross Block

1000

Preference Capital

100 Less Dep.

Term Loan

600 Net Block

800

Bank O.D.

400 Inventory

300

Sundry Creditors

100 Receivable

150

Invest.

200

in

Govt.

50

Securities
Preliminary Expenses
TOTAL

1400 TOTAL

Compute the following ratios

f. Debt Equity Ratio
g. Tangible Net worth
h. Net Working Capital
i. Current Ratio
j. Quick Ratio

100
1400

ANSWER:
SOLUTION
Restructured Balance Sheet
LIABILITY

ASSET

NET WORTH

FIXED ASSET

Equity Capital

200

Preference Capital

100

300

Gross Block

1000

Less: Depreciation

200

Net block
TERM

800

INTANGIBLE ASSET

LIABILITY
Term Loan

600

600

CURRENT

Preliminary Expenses

100

100

CURRENT ASSET

LIABILITY
Bank Overdraft

400

Sundry Creditors

100

500

Inventory

300

Receivable

150

Investment

in

Govt. 50

500

Securities
TOTAL

Debt Equity Ratio =

1400 TOTAL

Debt
= 600
T.N.W 200

1400

=3:1

Tangible Net Worth = N.W. I.A. = 300 - 100 = 200

Net Working Capital = CA CL = 500 - 500

= Nil

 Current Ratio =
Quick Ratio =

CA 500
=
=
CL 500

1: 1

CA - Inventory
= 500 - 300
CL
500

200
=
500

0.40:1

7. While analyzing the balance sheet, the assets and liabilities are
grouped into how many categories? Which are they?
ANSWER:
Liability
Net worth
Term liability
Current liability
Assets
Fixed assets
Non-current assets
Intangible assets
Current assets
8. Explain the salient features of CGTMSE guarantee scheme.
ANSWER
CREDIT GUARANTEE FUND TRUST FOR
MICRO&SMALL ENTERPRISES (CGTMSE)
Credit Guarantee Fund trust for Micro and Small Enterprises was
set up by government of India and SIDBI in August 2000 to make
collateral free credit facilities, available to MSEs.
Eligible institutions: All scheduled commercial banks and
specified RRBs,NSIC,NEDFI,SIDBI (called member lending
institutions )
Eligible borrowers: New and existing MSE units engaged in
manufacturing activities or in IT and software industry or credit
facilities to select activities under Agri-Clinics and Agri-Business
.Centres

Rehabilitation cases: For the unit covered under CGTSI and

becoming sick due vto factors beyond the control of management,
assistance for rehabilitation extended by the lender could also be
covered within the overall cap of Rs100lacs.
Maximum risk cover:
Extent of guarantee cover (wef December08,2008)

Women enterprises &North

Eastern States
Loan up to Rs5lac:85%
Loan up toRs50lac:80%
Loan above Rs50lacto
Rs100lac:50%
Total amount restricted to
Micro Enterprises
Loan up to Rs5lac:85%
Loan up to Rs50lac:75%
Loan above Rs50lac to
Rs100lac:50%
Total amount restricted to
Other loans
Loan up to Rs50lac:75%
Loan above Rs50lac to
Rs100lac:50%
Total amount restricted to

(in lac)
4.25
40.00
25.00
65.00

4.25
37.50
25.00
62.50

37.50
25.00
62.50

*as %age of principal outstanding on date of NPA or on the date of

filing the claim, whichever is lower.
Exclusion from risk cover: Other charges such as penal interest,
commitment charge, service charge, or any other levies/expenses
shall not qualify for the guarantee cover.
Conditions For Guarantee Cover: Credit facilities extended by
more than one bank and /or financial institution jointly and /or

separately to eligible borrower up to a maximum of Rs100lac per

borrower subject to ceiling amount of individual MLI.
Amount of loans: Rs100lac including fund and non-fund based
limits (for RRBs and select financial institutions, the amount is
Rs50lac)
Collateral security: The credit facility has to be given without
collateral and /or third party guarantee. Loans against guarantee of
Government or DICGC, not eligible.
Time limit for obtaining guarantee cover: Within the quarter,
next to the quarter, during which the credit facilities are
sanctioned.
Tenure of guarantee cover: The maximum period of guarantee
cover shall be the agreed tenure of term loan. The period is 5 years
where only working capital facilities are sanctioned.
Guarantee and service fee
Guarantee fee
Service Fee
General
1.5%
0.75%
MSE up to Rs5lac
1%
0.5%
NE States
0.75%
Same as above
Periodicity of
One time, up front
Renewal 31st
payment
(advances)
march each year
Period for payment Within one month
Within 2 months
st
from 1 disbursement from 31st March
Invocation of guarantee
If
Account has been classified as NPA as per RBI guidelines
Recovery proceeding have been initiated
Guarantee is in force, the bank may invoke the guarantee
Within one year from the date of NPA if NPA is after lock in
period or
Within one year from date of completion of 18 months lock
in period
Payment of the claim amount

o The trust shall pay 75% of the guaranteed amount on preferring of

eligible claim by the lending institution, within 30days.For delay
beyond 30 days, trust shall pay interest on the eligible claim
amount at the prevailing bank rate. The balance 25% will be paid
on conclusion of recovery proceedings by the lending institution.
Sharing of recovery:
Recovery shall be first appropriated towards cost of recovery, balance
amount for recovery of fee and other charges of CGTMSE and
balance amount on prorate basis i.e. 85;15,80:20or 75:25.
9. Explain the salient features of DRI scheme.
ANSWER:
Introduced in 1972
The scheme operates through all schedule Commercial Banks
except Regional Rural Banks
All scheduled commercial banks are required to give DRI
advance to the extent of 1% of its total advance as at the
previous year
Not less than two third of DRI advances is to be routed through
rural and semi-urban branches
Minimum 40% of DRI advances should go to SC/STs
The family income of borrower from all sources should not
exceed Rs18000/in case of rural areas and Rs24000/ in case of
urban and semi-urban areas.
The land holding of the borrower should not exceed 2.5 acres
(in case of dry land )or 1 acre (in case of wet land ).However,
SC/ST Borrowers are eligible irrespective of their land
holdings.
The activity should become economically viable within a
period of three years.

 The borrower should not avail any other credit at the same
time.
There is no need to obtain documentary evidence to prove
borrowers eligibility. Bank should ascertain the same by local
enquiry.
The cost of the photograph to be borne by the bank
Maximum loan amount is Rs15000/as a composite loan
Margin NIL
Interest 4% simple
Repayment period: Maximum five years with maximum
moratorium period of two years.
Security NIL
Different purposes for which loan can be sanctioned :
-Loans under this scheme can be sanctioned for any
economically viable activity and certain other purposes as
follows
-Educational loan can be given up to Rs15000/for higher
education of their ward if the latter not getting any other
scholarship.
-SC/ST beneficiaries can be given loan up to Rs20000/ for
construction of houses and repair of their houses, in addition to
assistance under DRI scheme up to Rs15000/
-Loans of Rs5000/ are sanctioned under DRI scheme to
physically handicapped persons for purchase of equipment
/physical aids/accessories/artificial limbs/hearing aids/wheel
chairs etc. This amount to be sanctioned in addition to the
overall limits of Rs15000/for financial assistance under DRI
scheme for a gainful activity.

PART-D
Answer all the questions. Each question carries TEN
marks.(2X10=20)
10. Please classify the following items into Assets & Liabilities
appropriately and draw a Balance Sheet.
Sl.
No
1.
2.
3
4.

Description
Consumable Stores and Spares
Provision for Taxation
Prepaid Expenses
Preliminary and Pre-Operative Expenses

Amount
10
4
10
4

5.
6.
7.
8.
9.
10.
11.
12
13.
14.
15
16
17
18.
19.
20.
21
22
23
24
25
26
27
28
29

Reserves and Surplus

Furniture & Fixtures
Investment in Subsidiaries
Sundry Debtors outstanding less than 365
days
Bill Receivables
Debtors outstanding for more than 365 Days
Stock in Process
Debentures
Unsecured Loans payable after 12 months
Bank Overdrafts
Goodwill
Installment of Term Loan payable in 12
months.
Term Loan excluding installment payable in
12 months
Paid Up Capital
Authorized Capital
Profit & Loss A/c (Debit Balance)
Raw Material
Bills Payable
Provision for Dividend
Land and Buildings
Cash and Bank Balance
Banks Cash Credit Limit outstanding
balance
Sundry Creditors
Plant and Machinery
Investment in Shares (Non Govt. Security)

8
6
4
20
10
10
10
20
10
20
6
10
20
32
100
10
20
20
10
40
10
30
16
14
6

30 Finished Goods
ANSWER;
Liabilities

10
Assets

Net Worth (5 + 18)

40 Fixed Assets (6+24+28)

60

Long Term Liabilities

50 Non -Current Assets

20

(12+13+17)

(7+10+29)

Current Liabilities

110 Intangible Assets

(2+14+16+22+23+26+27)

20

(4+15+20)
Current Assets

100

(1+3+8+9+11+21+25+30)
TOTAL

200 TOTAL

200

11. From the following balance sheets, compute the changes in the
Assets and Liabilities and classify them as sources/uses:
Balance Sheet of Firm A
Rs in Lakhs
Rs in Lakhs
Liabilities
Share Capital
Reserves & Surplus
Long Term Debts
Debentures

Assets
2006 2007
60
60 Fixed Assets (Net )
60
70
Long term
40
50 investments
60
70

Term
Loans
Current Liabilities and

Current Assets

2006 2007
240 260
10

10

Provisions
Loans and Advances
(Bank Borrowings )
Sundry creditors
Provisions

100
70
30

420

110

Cash and Bank

balances
75
Debtors
25
Inventories
Pre-paid
expenses
Other Current Assets
460

12
70
72
6
10

17
65
86
10
12

420

460

Other information: Accumulated Depreciation during the year ending

2006 was Rs160 lakhs and Rs180 lakhs during the year ending 2007.
Comment on Net Working Capital and the surplus/deficit of the sources
and uses.

ANSWER:
Long term source (in lacs)
Reserves & Surplus
Depreciation
Debentures
Term loans
Total long term source
Long term use
Fixed Asset ( 440-400)
Long term surplus
Increase in current asset (+5-5+14
+4+2)
Increase in current liability other
than bank borrowings (+5-5)
Increase in working capital gap
Increase in bank borrowings
Long term surplus

10
20
10
10
50
40
10
20
0
20
10
10

Net working capital in 2006

Net working capital in 2007

-30
-20

Net working capital is negative in 2006 but improved by 10lacs

in 2007 but continues to be negative in 2007
Inventories are not adequate to cover bank borrowings
Fixed assets are financed out of short term resources
****