Factoring Services WHAT IS FACTORING? MECHANICS OF FACTORING

Size: px
Start display at page:

Download "Factoring Services WHAT IS FACTORING? MECHANICS OF FACTORING"

Transcription

1 Factoring Services S Balasubramanian, Vice President (Finance) & Company Secretary, Canbank Factors Ltd., Bangalore. Realisation of outstanding dues is increasingly becoming a complicated and tedious exercise. Factoring seeks to address this problem by helping creditors to realize their dues. This article explains the mechanics of factoring services. Most of the manufacturers and suppliers of goods and services experience lot of difficulties in collecting their book debts in time. Delays in collection often lead to liquidity problems, delayed production and supply, affecting the growth of industry. Cash provides the necessary lubrication for the wheels of business and industry to move smoothly. These days, where most of the sales is on credit, none can be sure of prompt payments. Irregular realization may result in inadequate cash flow and all consequential problems. One of the ways to ensure smooth cash flow is to avail "Factoring Services." WHAT IS FACTORING? Factoring is a new financial service which was introduced during 1991 in India. It is, in fact, not just a single service, but a portfolio of complementary financial services. Factoring is a powerful alternative instrument, particularly designed to meet the post sales working capital requirement of the Industrial/Trade/Service Sector. Clients (i.e., Sellers) can avail themselves of some or all of these, according to their individual needs. The Functions of a Factor are : - Sales ledger administration. Debt collection services. Finance generally up to 80% of the Invoice value and in exceptional cases up to 100% of the invoice value. Credit Insurance Advisory Services. MECHANICS OF FACTORING 1. Customer places order on the client. 2. Factor fixes customer limit. 3. Client delivers goods and invoice to customer with notice to pay Factor. 4. Client tenders copy of invoice to Factor. 5. Factor makes prepayment up to 80% of the invoice value. 6. Factors sends monthly statements to customers. 7. Factor follows up if unpaid by due date. 8. Customers makes payment to Factor.

2 9. Factor releases balance amount to the client. Methodology Clients enter into a factoring arrangement with the factor, who takes responsibility for dealing with all their receivables. Factor fixes a limit for purchase of debts and allows prepayment generally up to 80% of the invoice value. The original invoice and title documents (like LRs or RRs) can be directly sent by clients to their customers (i.e., buyers), and only copies handed over to the factor. Depending upon the individual customer limits fixed by the factor, the invoices are purchased and prepayments made. The invoice carries a clause of "assignment of debt" in favour of the factor and directs the customer to pay the factor direct. The factor now follows-up with the customer for payment. In recourse factoring, ultimate customer risk is borne by the clients, and in full factoring, by the factor. FACTOR-YOUR WORKING CAPITAL PARTNER Commercial banks normally provide working capital finance to the trade and industry, this takes the form of cash credit facility against inventory and bills finance against receivables. For a variety of reasons (eg., buyers not willing to accept the bills of exchange, or delays involved in routing documents through banks). Suppliers are unable to avail bills finance, and in such cases, factoring could be a very practical alternative. Factors normally handle receivables of the client on the whole turnover principle. However, if it is possible to bifurcate sales into, bills based and open account sales, limit for the former could be retained in the bank and the latter may be tendered for factoring. If the client has charged his receivables as security for cash credit facility provided by the bank, a letter of disclaimer from the Bank would obviously be needed. Arrangement between the Bank and the Factor includes routing of all payments made by the Factor through Client s operative account with Bank. It is as though hypothecated finished goods have become cash! Thus, in a Factoring arrangement, all that happens is, the client shares the post-sale component of the working capital with the Factor, who specializes in handling receivables. Benefits of Factoring In Factoring the buyer need not accept a Bill of Exchange. He has to just abide by the notice on the invoice by the seller, to pay the value of invoice directly to the Factor. The benefits of Factoring vis-a-vis Bank Finance are as under : SL. NO. AREA FACTORS BANK 1 Funding Up to 80% Normally % 2 Availability of Finance Instant against each invoice akin to cash sales Periodically (Monthly/Fortnightly). No DP for intermediate invoices.

3 3 Collection In-Built Not done 4 Collection Time Very Fast (Through the Branches) Takes time (Collection of Cheques) 5 Credit Period Market related and flexible approach up to 1 Days Generally uniform - 60 to 90 days only. 6 Customer Evaluation Customers evaluated and sublimits fixed (Indirect Credit) Protection No such service 7 Follow-up of Closely followed up No such service 8 Based Services Sales Ledger Administration, MIS Data furnished (Age-wise breakup, Overdues statement, etc..) No such services. Financing alone done. 9 Bifurcation of Limits No Bifurcation like CC account Higher limits are bifurcated to CC and Demand Loan. 10 Submission of Returns Stock/ statements, select monthly operational data, Financial follow up report need not be submitted. Financial Follow-up Reports, etc. Should be submitted. 11 Computerization Total Partial (Depends on Branch) 12 of Associates Selectively Factored Not financed Accounting The debts of the company which are assigned in favour of the factor can be removed from current assets and the margin retained by the factor alone needs to be shown under "Other Current Assets." However, the prepayment amount received from the Factor has to be shown under "Contingent Liabilities", as Factor retains the right of recourse "to the client" in case of non-payment by the customer. The above method of presentation helps in improving the overall working capital position of the Company and thereby increases the Current Ratio. To illustrate this point we present below two situations : Before availing Factoring Services

4 (Amount in Rs.) Liabilities Assets Shareholders funds 85 Fixed Assets Current Liabilities : Current Assets : Bank Overdraft 90 Inventory Sundry Creditors Other Current Liabilities Other Current Assets 25 Total Liabilities 225 Total Assets 225 CURRENT RATIO : 1.25 After availing Factoring Services : - Factoring Pre-payment Limit : Rs.100 Margin : % Prepayment availed : Rs. 80 Liabilities Assets Shareholders funds Current Liabilities : Bank Overdraft Sundry Creditors Other Current Liabilities Fixed Assets Current Assets : Inventory Other Current Assets Due from factors Nil 25 Total Assets 145 CURRENT RATIO : 1.58 Contingent Liabilities

5 Pre-payment received towards Bills factored with M/s Canbank Factors Ltd., pending Realisation àrs.80 From the above it may be observed that the factoring arrangement not only helps a client in improving his "cash flow position", but also enables him to show a better working capital position and thereby presents a better Balance Sheet at any given point of time. Cost of Services Unlike in Western countries, Factoring in India is quite inexpensive. Factor charges discount on the Prepayment drawn by the Client and the rates are on par with Bank s lending rates. Discount charges are collected monthly on actual drawings in the prepayment account. There is also a service charge, ranging from 0.1% to 0.5% of the invoice value, depending upon the services availed, and volume of transactions. FOOTNOTES:

LESSON 13: FACTORING THEORETICAL FRAMEWORK

LESSON 13: FACTORING THEORETICAL FRAMEWORK LESSON 13: FACTORING THEORETICAL FRAMEWORK Lesson Objectives To understand the Concept of Factoring. Methodology of Factoring and Forfeiting. Types of factoring. Introduction Receivables constitute a significant

More information

WORKING CAPITAL & BANK STOCK AUDIT

WORKING CAPITAL & BANK STOCK AUDIT WORKING CAPITAL & BANK STOCK AUDIT C E P D I S C U S S I O N B Y C M A R P G O R E I C M A I - A U R A N G A B A D C H A P T E R O N 3 1 ST J U LY 2 0 1 5 WORKING CAPITAL WORKING CAPITAL ARE FUNDS REQUIRED

More information

Factoring. To explain nature, function and types of factoring. To dilate upon modus operandi of factoring.

Factoring. To explain nature, function and types of factoring. To dilate upon modus operandi of factoring. Learning Objectives: Factoring To explain nature, function and types of factoring. To dilate upon modus operandi of factoring. To bring out potentiality of factoring as a source of finance. To highlight

More information

Meaning & Definitions Aspect of Credit Management Objectives of Accounts Receivables Management Advantages of Trade Debtors Management Costs of

Meaning & Definitions Aspect of Credit Management Objectives of Accounts Receivables Management Advantages of Trade Debtors Management Costs of Management of Accounts Receivable Meaning & Definitions Aspect of Credit Management Objectives of Accounts Receivables Management Advantages of Trade Debtors Management Costs of Maintaining Accounts Receivables

More information

ACCOUNTING RATIOS I. MODULE - 6A Analysis of Financial Statements. Accounting Ratios - I. Notes

ACCOUNTING RATIOS I. MODULE - 6A Analysis of Financial Statements. Accounting Ratios - I. Notes MODULE - 6A Accounting Ratios - I 8 ACCOUNTING RATIOS I In the previous lesson, you have learnt the relationship between various items of the financial statements. You have also learnt various tools of

More information

THE CONCEPTUAL FRAMEWORK OF FACTORING ON SMALL AND MEDIUM ENTERPRISES

THE CONCEPTUAL FRAMEWORK OF FACTORING ON SMALL AND MEDIUM ENTERPRISES THE CONCEPTUAL FRAMEWORK OF FACTORING ON SMALL AND MEDIUM ENTERPRISES Minaxi Rani Assistant Professor (Extn.), Department of Commerce, Govt. College for women P.G. College, Hisar, Haryana, (India) ABSTRACT

More information

STATE BANK OF INDIA BRANCH. Interview Form For Loans above Rs.25,000/- (To be submitted to the Sanctioning Authority along with the Application Form)

STATE BANK OF INDIA BRANCH. Interview Form For Loans above Rs.25,000/- (To be submitted to the Sanctioning Authority along with the Application Form) Annexure-SBF/3 STATE BANK OF INDIA BRANCH SMALL BUSINESS FINANCE Interview Form For Loans above 25,000/- (To be submitted to the Sanctioning Authority along with the Application Form) To be used for :

More information

WORKING CAPITAL MANAGEMENT

WORKING CAPITAL MANAGEMENT CHAPTER 9 WORKING CAPITAL MANAGEMENT Working capital is the long term fund required to run the day to day operations of the business. The company starts with cash. It buys raw materials, employs staff

More information

tutor2u Working Capital Introduction to the Management of Working Capital AS & A2 Business Studies PowerPoint Presentations 2005

tutor2u Working Capital Introduction to the Management of Working Capital AS & A2 Business Studies PowerPoint Presentations 2005 Working Capital Introduction to the Management of Working Capital AS & A2 Business Studies PowerPoint Presentations 2005 Introduction All businesses need cash to survive Cash is needed to: Invest in fixed

More information

Based on the suggestion received from IBA, our Board has approved the following methodology of Calculation of Drawing Power (DP) under MPBF.

Based on the suggestion received from IBA, our Board has approved the following methodology of Calculation of Drawing Power (DP) under MPBF. MAIN : ADV-138/2014-15 DT. 11-12-2014 a SUB : CONV-26 CO/CREDIT DIVISION FILE M-2 S-205 SUB : Revised method of arriving Drawing Power (DP) and other issues as advised by Indian Banks Association (IBA)

More information

Factoring and Forfaiting

Factoring and Forfaiting Factoring and Forfaiting Chapter XII Factoring and Forfaiting After reading this chapter, you will be conversant with: The Concept and Mechanics of Factoring and Forfaiting Different Types of Factoring

More information

CA CPT SAMPLE PAPER FUNDAMENTAL ACCOUNTING (60MARKS)

CA CPT SAMPLE PAPER FUNDAMENTAL ACCOUNTING (60MARKS) CA CPT SAMPLE PAPER FUNDAMENTAL ACCOUNTING (60MARKS) 1. Which of the following provide frame work and accounting policies so that the financial statements of different enterprises become comparable? (a)

More information

Discounting, Factoring & Forfeiting

Discounting, Factoring & Forfeiting Discounting, Factoring & Forfeiting Introduction Bill Discounting Factoring- Meaning & Definition Modus Operandi Terms of Agreement Functions Types of Factoring Factoring Vs Discounting Cost of Factoring

More information

Ratio Analysis. A) Liquidity Ratio : - 1) Current ratio = Current asset Current Liability

Ratio Analysis. A) Liquidity Ratio : - 1) Current ratio = Current asset Current Liability A) Liquidity Ratio : - Ratio Analysis 1) Current ratio = Current asset Current Liability 2) Quick ratio or Acid Test ratio = Quick Asset Quick liability Quick Asset = Current Asset Stock Quick Liability

More information

Current Assets. Current Liabilities. Quick Assets or Liquid Assets. Current Liabilities. 1. Liquidity Ratios 1 Current Ratio Formula.

Current Assets. Current Liabilities. Quick Assets or Liquid Assets. Current Liabilities. 1. Liquidity Ratios 1 Current Ratio Formula. 1. Liquidity Ratios 1 Current Ratio Current Assets Current Liabilities This ratio shows short-term financial soundness of the business. Higher ratio means better capacity to meet its current obligation.

More information

M.C.A. Attempt all question of this section : Fill in. the blanks : The system of recording important transactions

M.C.A. Attempt all question of this section : Fill in. the blanks : The system of recording important transactions j 1111111111111 M.C.A (SEM J) QDD SEMESTER THEORY EXA.\lINATION 2009-10 ACCOUNTING & FINANCIAL MA~AGEMENT Attempt all question of this section : Fill in. the blanks : (a) The system of recording important

More information

Invoice Factoring, Debtors Discounting and Trade Finance are bridging facilities using your debtors, stock or movable assets to raise cash.

Invoice Factoring, Debtors Discounting and Trade Finance are bridging facilities using your debtors, stock or movable assets to raise cash. Dear Sir / Madam, Re Bridging Facilities Invoice Factoring, Debtors Discounting and Trade Finance are bridging facilities using your debtors, stock or movable assets to raise cash. A key element is that

More information

Factoring and Forfaiting

Factoring and Forfaiting Factoring and Forfaiting -A fund/fee based financial service Prof. Nishant Dhruv, What is Factoring? Definition: Factoring provides resources to finance receivables as well as facilitates the collection

More information

MARK SCHEME for the October/November 2011 question paper for the guidance of teachers 0452 ACCOUNTING. 0452/23 Paper 2, maximum raw mark 120

MARK SCHEME for the October/November 2011 question paper for the guidance of teachers 0452 ACCOUNTING. 0452/23 Paper 2, maximum raw mark 120 www.xtremepapers.com UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS International General Certificate of Secondary Education MARK SCHEME for the October/November question paper for the guidance of

More information

for Your Business Providing working capital for business

for Your Business Providing working capital for business The Cost-Effective Cash Flow Solution for Your Business Providing working capital for business Your invoices represent one of your most valuable business assets however, until they are paid, they are not

More information

ICAP GROUP S.A. FINANCIAL RATIOS EXPLANATION

ICAP GROUP S.A. FINANCIAL RATIOS EXPLANATION ICAP GROUP S.A. FINANCIAL RATIOS EXPLANATION OCTOBER 2006 Table of Contents 1. INTRODUCTION... 3 2. FINANCIAL RATIOS FOR COMPANIES (INDUSTRY - COMMERCE - SERVICES) 4 2.1 Profitability Ratios...4 2.2 Viability

More information

Bill Discounting. Exporter. Importer BANKING AND TRADE FINANCE TUTORIAL. Importer s Bank. Exporters Bank INDIA FOREX ADVISORS.

Bill Discounting. Exporter. Importer BANKING AND TRADE FINANCE TUTORIAL. Importer s Bank. Exporters Bank INDIA FOREX ADVISORS. Bill Discounting While discounting a bill, the Bank purchases the bill receivable to the Exporter (i.e. Bill of Exchange or Promissory Note) before its due date and credits the value of the bill to the

More information

CIMA F3 Course Notes. Chapter 3. Short term finance

CIMA F3 Course Notes. Chapter 3. Short term finance CIMA F3 Course Notes c Chapter 3 Short term finance Personal use only - not licensed for use on courses 31 1. Conservative, Aggressive and Matching strategies There are three over-riding approaches to

More information

PRESENTATION ON FACTORING BY GLOBAL TRADE FINANCE LIMITED 19.06.2007. Global Trade Finance Ltd

PRESENTATION ON FACTORING BY GLOBAL TRADE FINANCE LIMITED 19.06.2007. Global Trade Finance Ltd PRESENTATION ON FACTORING BY GLOBAL TRADE FINANCE LIMITED 19.06.2007 o Incorporated in March 2001 o o o o ABOUT GTF India s first International Factoring Company RBI has accorded registration and Authorised

More information

HOW TO IMPROVE CASH FLOW WITH INVOICE FINANCE. September 2015

HOW TO IMPROVE CASH FLOW WITH INVOICE FINANCE. September 2015 HOW TO IMPROVE CASH FLOW WITH INVOICE FINANCE September 2015 Contents 1. What is invoice finance? 2. What is The Invoice Market? 3. Why does it take large companies so long to pay invoices? 4. Invoice

More information

CHAPTER 9. Ratio Analysis

CHAPTER 9. Ratio Analysis CHAPTER 9 Ratio Analysis Introduction The analysis of the financial statements and interpretations of financial results of a particular period of operations with the help of 'ratio' is termed as "ratio

More information

Xynergy Commercial Capital LLC

Xynergy Commercial Capital LLC Xynergy Commercial Capital LLC How Can Work For You The Problem Short of cash and must pay suppliers, lease, bills and salaries? No need for stress, get your payments in advance for your invoices and pay

More information

Debtor Management (Relevant to PBE Paper II Management Accounting and Finance)

Debtor Management (Relevant to PBE Paper II Management Accounting and Finance) Debtor Management (Relevant to PBE Paper II Management Accounting and Finance) Eric Y.W. Leung, CUHK Business School, The Chinese University of Hong Kong Accounts receivable forms quite a significant part

More information

Notes. CIMA Paper P1. Performance Operations

Notes. CIMA Paper P1. Performance Operations Chapter 5 extract from our ExPress notes for use with the current video. A full set of P1 ExPress notes can be downloaded free of charge at www.. CIMA Paper P1 Performance Operations For exams in 2011

More information

Accounts Payable are the total amounts your business owes its suppliers for goods and services purchased.

Accounts Payable are the total amounts your business owes its suppliers for goods and services purchased. Accounts Payable are the total amounts your business owes its suppliers for goods and services purchased. Accounts Receivable are the total amounts customers owe your business for goods or services sold

More information

Webcast on Revised Schedule VI. CA. Pankajj Goel

Webcast on Revised Schedule VI. CA. Pankajj Goel Webcast on Revised Schedule VI CA. Pankajj Goel Overview Background and Applicability Significant Features Major Changes Structure of Revised Schedule VI Form of Balance Sheet Statement of Profit and Loss

More information

HOW TO IMPROVE THE WORKING CAPITAL OF A COMPANY

HOW TO IMPROVE THE WORKING CAPITAL OF A COMPANY Volume 3, Issue 5 (May, 2014) Online ISSN-2277-1166 Published by: Abhinav Publication Abhinav National Monthly Refereed Journal of Research in HOW TO IMPROVE THE WORKING CAPITAL OF A COMPANY Hemanshu Kapadia

More information

It is concerned with decisions relating to current assets and current liabilities

It is concerned with decisions relating to current assets and current liabilities It is concerned with decisions relating to current assets and current liabilities Best Buy Co, NA s largest consumer electronics retailer, has performed extremely well over the past decade. Its stock sold

More information

½ a mark for rounding up (6 marks) (b) There are a number of costs to the business associated with holding inventory:

½ a mark for rounding up (6 marks) (b) There are a number of costs to the business associated with holding inventory: EDI LCCI IQ ON DEMAND AWARD IN BUSINESS FINANCE AND BANKING OPERATIONS SAMPLE LEVEL 4 MARKING SCHEME DISTINCTION MARK 75% CREDIT MARK 60% PASS MARK 50% TOTAL 100 MARKS QUESTION 1 (a) Inventory days Receivable

More information

Income Measurement and Profitability Analysis

Income Measurement and Profitability Analysis PROFITABILITY ANALYSIS The following financial statements for Spencer Company will be used to demonstrate the calculation of the various ratios in profitability analysis. Spencer Company Comparative Balance

More information

Guide Book to Factoring

Guide Book to Factoring Guide Book to Factoring 1 Contents Welcome 3 Our Aim 4 Introduction 5 New Customers 6 Submitting your invoices and credit 7 notes Calculating your availability 8 Disapprovals for funding 9 Funding 10 Credit

More information

Guide For Directors Of Insolvent Companies In The Cayman Islands

Guide For Directors Of Insolvent Companies In The Cayman Islands Guide For Directors Of Insolvent Companies In The Cayman Islands This guide provides general information on insolvency for directors whose companies are in financial difficulty, or are insolvent. Any queries

More information

Paper 5- Financial Accounting

Paper 5- Financial Accounting Paper 5- Financial Accounting Academics Department, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 1 Paper 5- Financial Accounting Full Marks:100 Time allowed:

More information

Discussion Board Articles Ratio Analysis

Discussion Board Articles Ratio Analysis Excellence in Financial Management Discussion Board Articles Ratio Analysis Written by: Matt H. Evans, CPA, CMA, CFM All articles can be viewed on the internet at www.exinfm.com/board Ratio Analysis Cash

More information

The Nature, Elements and Importance of Working Capital

The Nature, Elements and Importance of Working Capital C. WORKING CAPITAL MANAGEMENT 1. The nature, elements and importance of working capital 2. Management of inventories, accounts receivable, accounts payable and cash 3. Determining working capital needs

More information

Incisive Business Guide to Factoring

Incisive Business Guide to Factoring Incisive Guide to Factoring Factoring Guide Summary This guide from Incisive outlines the features and benefits for your business from using factoring and invoice discounting services. Factoring is commonly

More information

Supervision and Follow-up of Advances

Supervision and Follow-up of Advances Supervision and Follow-up of Advances Jyoti Kumar Pandey Deputy General Manager & Member of Faculty College of Agricultural Banking Reserve Bank of India Pune Credit Life Cycle Theory Credit Opportunity

More information

For our curriculum in Grade 12 we are going to use ratios to analyse the information available in the Income statement and the Balance sheet.

For our curriculum in Grade 12 we are going to use ratios to analyse the information available in the Income statement and the Balance sheet. SUBJECT: ACCOUNTING GRADE 12 CHAPTER: COMPANIES LESSON: ANALYSIS AND INTERPRETATION-RATIOS LESSON OVERVIEW (KNOWLEDGE AREAS) LESSON 1. Introduction 2. Analysing of financial statements and its purpose

More information

MARK SCHEME for the May/June 2012 question paper for the guidance of teachers 0452 ACCOUNTING. 0452/22 Paper 2, maximum raw mark 120

MARK SCHEME for the May/June 2012 question paper for the guidance of teachers 0452 ACCOUNTING. 0452/22 Paper 2, maximum raw mark 120 www.xtremepapers.com UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS International General Certificate of Secondary Education MARK SCHEME for the May/June question paper for the guidance of teachers

More information

7 Management of Working Capital

7 Management of Working Capital 7 Management of Working Capital BASIC CONCEPTS AND FORMULAE 1. Working Capital Management Working Capital Management involves managing the balance between firm s shortterm assets and its short-term liabilities.

More information

CHAPTER 17 APPENDIX 17-A

CHAPTER 17 APPENDIX 17-A CHAPTER 17 APPENDIX 17-A Proposal Form for Obtaining Working Capital Loan Whether fresh/ renewal/ enhancement : Asset classification : Credit rating by bank : Consortium/Multiple bank : Whether CMA (Credit

More information

It is concerned with decisions relating to current assets and current liabilities

It is concerned with decisions relating to current assets and current liabilities It is concerned with decisions relating to current assets and current liabilities Best Buy Co, NA s largest consumer electronics retailer, has performed extremely well over the past decade. Its stock sold

More information

Chapter. Working capital

Chapter. Working capital Chapter 10 Working capital 1 10.1 Working capital Working capital is the capital available for conducting the day-to-day operations of the business and consists of current assets and current liabilities.

More information

Paper FFM. Foundations in Financial Management FOUNDATIONS IN ACCOUNTANCY. Pilot Paper. The Association of Chartered Certified Accountants

Paper FFM. Foundations in Financial Management FOUNDATIONS IN ACCOUNTANCY. Pilot Paper. The Association of Chartered Certified Accountants FOUNDATIONS IN ACCOUNTANCY Foundations in Financial Management Pilot Paper Time allowed: 2 hours This paper is divided into two sections: Section A ALL TEN questions are compulsory and MUST be attempted

More information

CENTRE FOR CONTINUING EDUCATION BBA (AVIATION OPERATION)

CENTRE FOR CONTINUING EDUCATION BBA (AVIATION OPERATION) CENTRE FOR CONTINUING EDUCATION BBA (AVIATION OPERATION) BATCH: SEMESTER: NAME: ROLL NO: ASSIGNMENT 1 & 2 FOR BUSINESS ACCOUNTING BBCF 131 UNIVERSITY OF PETROLEUM & ENERGY STUDIES Assignment-1 Note: All

More information

Financial Ratios and Quality Indicators

Financial Ratios and Quality Indicators Financial Ratios and Quality Indicators From U.S. Small Business Administration Online Women's Business Center If you monitor the ratios on a regular basis you'll gain insight into how effectively you

More information

Ratio Analysis 0.75. Fixed Assets Fixed Assets + Net Working Capital =0.75 Fixed Assets

Ratio Analysis 0.75. Fixed Assets Fixed Assets + Net Working Capital =0.75 Fixed Assets Ratio Analysis CA Past Years Exam Answer Answer to Q.1: (Nov, 009) Fixed assets ` 18,00,000 Proprietor s funds ` 4,00,000 Note: 1 Ratio of fixed assets to proprietor s funds 0.75 Properietors Fund 0.75

More information

5. Provisions for decrease in value of marketable securities (-)

5. Provisions for decrease in value of marketable securities (-) Balance sheet ASSETS I. CURRENT ASSETS A. Liquid Assets: 1. Cash. 2. Cheques received. 3. Banks. 4. Cheques given and payment orders (-). 5. Other liquid assets. B. Marketable Securities: 1. Share certificates.

More information

WORKING CAPITAL MANAGEMENT

WORKING CAPITAL MANAGEMENT WORKING CAPITAL MANAGEMENT What is Working Capital Working capital management is the set of activities that are required to run day to day operations of the business to ensure that cash is adequate to

More information

CHAPTER 6. P.6.17 The following are the ratios relating to the activities of National Traders Ltd:

CHAPTER 6. P.6.17 The following are the ratios relating to the activities of National Traders Ltd: CHAPTER 6 Solved Problems P.6.17 The following are the ratios relating to the activities of National Traders Ltd: Debtors velocity (months) 3 Stock velocity (months) 8 Creditors velocity (months) 2 Gross

More information

Many members will be in some way involved with the control of Working Capital and its influence upon business success.

Many members will be in some way involved with the control of Working Capital and its influence upon business success. Working Capital Control, Philip E Dunn Many members will be in some way involved with the control of Working Capital and its influence upon business success. Working capital is a key element in business

More information

Insurance Claim For Loss of Stock and Loss of Profit

Insurance Claim For Loss of Stock and Loss of Profit Insurance Claim For Loss of Stock and Loss of Profit Insurance Claim Loss of Stock. Loss of Profit (Consequentia l Loss). Calculation of Loss of Profit. Insurance Contract is contract of indemnity. Under

More information

COUNCIL FOR THE INDIAN SCHOOL CERTIFICATE EXAMINATIONS P-35,36, Sector VI, Pushp Vihar, New Delhi-110017 NEW DELHI ISC ACCOUNTS

COUNCIL FOR THE INDIAN SCHOOL CERTIFICATE EXAMINATIONS P-35,36, Sector VI, Pushp Vihar, New Delhi-110017 NEW DELHI ISC ACCOUNTS COUNCIL FOR THE INDIAN SCHOOL CERTIFICATE EXAMINATIONS P-35,36, Sector VI, Pushp Vihar, New Delhi-110017 NEW DELHI ISC ACCOUNTS Guidelines pertaining to Revised Schedule VI of Part I & II of Companies

More information

LESSON 6 RATIO ANALYSIS CONTENTS

LESSON 6 RATIO ANALYSIS CONTENTS LESSON 6 RATIO ANALYSIS CONTENTS 6.0 Aims and Objectives 6.1 Introduction 6.2 Definition 6.3 How the Accounting Ratios are Expressed? 6.4 Purpose, Utility & Limitations of Ratio Analysis 6.5 Classification

More information

The interest factor depends on the perceived risk factor by the banks, past track, growth and profitability trends and the industry profile.

The interest factor depends on the perceived risk factor by the banks, past track, growth and profitability trends and the industry profile. Business loans are offered to small and medium enterprises towards working capital, expansion, or modernization of existing business. It could be either secured or unsecured. The idea is that if there

More information

Actuarial Society of India

Actuarial Society of India Actuarial Society of India Examination November 2006 CT2: Finance and Financial Reporting Indicative Solutions Page 1 of 7 Solution 1-10 Sol 1 Sol 2 Sol 3 Sol 4 Sol 5 Sol 6 Sol 7 Sol 8 Sol 9 Sol 10 E E

More information

M. Com (1st Semester) Examination, 2013 Paper Code: AS-2368. * (Prepared by: Harish Khandelwal, Assistant Professor, Department of Commerce, GGV)

M. Com (1st Semester) Examination, 2013 Paper Code: AS-2368. * (Prepared by: Harish Khandelwal, Assistant Professor, Department of Commerce, GGV) Model Answer/suggested solution Business Finance M. Com (1st Semester) Examination, 2013 Paper Code: AS-2368 * (Prepared by: Harish Khandelwal, Assistant Professor, Department of Commerce, GGV) Note: These

More information

Welcome to workshop on revised schedule VI. K. Chandra Sekhar Company Secretary Ace Designers Limited, Bangalore

Welcome to workshop on revised schedule VI. K. Chandra Sekhar Company Secretary Ace Designers Limited, Bangalore Welcome to workshop on revised schedule VI K. Chandra Sekhar Company Secretary Ace Designers Limited, Bangalore 1 Relevant provisions Indian Companies Act, 1956 Rules Notifications Circulars Accounting

More information

Working Capital Financing with Specific Reference to Cash Credit Policies of Indian Overseas Bank

Working Capital Financing with Specific Reference to Cash Credit Policies of Indian Overseas Bank Working Capital Financing with Specific Reference to Cash Credit Policies of Indian Overseas Bank Souvik Ghosh MBA - Finance, Future Business School, West Bengal University of Technology, Kolkata, West

More information

First column=preferred terms. Bold and italics signifies other defined terms. Bold signifies alternate terms used.

First column=preferred terms. Bold and italics signifies other defined terms. Bold signifies alternate terms used. First column=preferred terms. Bold and italics signifies other defined terms. Bold signifies alternate terms used. 1= Governance; 2=Facilities and Products; 3 Charges; 4 Legal terms and security arrangements;

More information

Short-term investments (also known as marketable securities) are easily convertible to cash that a company plans to hold for a year or less.

Short-term investments (also known as marketable securities) are easily convertible to cash that a company plans to hold for a year or less. Accounting Fundamentals Lesson 5 5.0 Receivables & Investments Short-term investments (also known as marketable securities) are easily convertible to cash that a company plans to hold for a year or less.

More information

Article Accounting Terminology

Article Accounting Terminology Article Accounting Terminology Contents Page 1. Accounting Period... 4 2. Accounts Payable (Sundry Creditors)... 4 3. Accounts Receivable (Sundry Debtors)... 4 4. Assets... 4 5. Benchmarks... 4 6. B.O.S.

More information

COMPANIES INTERPRETATION OF FINANCIAL STATEMENTS 13 MARCH 2014

COMPANIES INTERPRETATION OF FINANCIAL STATEMENTS 13 MARCH 2014 COMPANIES INTERPRETATION OF FINANCIAL STATEMENTS 13 MARCH 2014 In this lesson we: Introduction Lesson Description Look at analysing financial statements and its purpose Consider users of financial statements

More information

Loanable Funds Bank can sanction Loans up to 75 % of Own Funds, 70 % of Deposits & 100 %of borrowing. Types of Loan Cash credit Overdraft Bill

Loanable Funds Bank can sanction Loans up to 75 % of Own Funds, 70 % of Deposits & 100 %of borrowing. Types of Loan Cash credit Overdraft Bill Credit Monitoring Introduction Credit Monitoring is an important part of Credit Management. Banking means the accepting for the purpose of lending or investment, of deposits of money from the public, repayable

More information

Problems on Balance Sheet of a Company as per Revised Schedule III of the Companies Act 2013

Problems on Balance Sheet of a Company as per Revised Schedule III of the Companies Act 2013 Problems on Balance Sheet of a Company as per Revised Schedule III of the Companies Act 2013 FORMAT OF BALANCE SHEET BALANCE SHEET of.company Limited as on 31 st March. Particulars Note No. Amount (Rs.)

More information

BANK ONE LIMITED. Small Medium Enterprises are clients engaged in commercial activities and generating turnover from Rs1.0million to Rs50million

BANK ONE LIMITED. Small Medium Enterprises are clients engaged in commercial activities and generating turnover from Rs1.0million to Rs50million Small Medium Enterprises are clients engaged in commercial activities and generating turnover from Rs1.0million to Rs50million New Relationship Existing Relationship Date: Branch: Officer: BUSINESS INFORMATION

More information

# Days Invoice Outstanding. Monthly Factoring Rate $1,000 85% $850 28 2% $20 $130 $980

# Days Invoice Outstanding. Monthly Factoring Rate $1,000 85% $850 28 2% $20 $130 $980 Accounts Receivable Finance IMM Financial offers an Accounts Receivable Finance or Program based on eligible Domestic or International Accounts Receivables. For Accounts Receivable to be eligible, they

More information

7 Management of Working Capital

7 Management of Working Capital 7 Management of Working Capital UNIT I : MEANING, CONCEPT AND POLICIES OF WORKING CAPITAL Learning Objectives After studying this chapter you will be able to: Discuss in detail about working capital management,

More information

Factoring and Invoice Discounting A Discussion Document from Pegasus Funding Resources

Factoring and Invoice Discounting A Discussion Document from Pegasus Funding Resources Factoring and Invoice Discounting A Discussion Document from Pegasus Funding Resources What is Invoice Finance? Many businesses these days can be well run and fundamentally sound, yet constantly suffer

More information

To enable highly rated corporate borrowers to diversify their sources of short term borrowings.

To enable highly rated corporate borrowers to diversify their sources of short term borrowings. COMMERCIAL PAPER (CP) CP is an unsecured money market instrument issued in the form of a Promissory Note and was introduced in 1990. Can now be issued in Dematerialised form. To enable highly rated corporate

More information

DEBTOR FINANCE. Please FAX signed application form back to Nova Business Finance on 1300 138 187

DEBTOR FINANCE. Please FAX signed application form back to Nova Business Finance on 1300 138 187 DEBTOR FINANCE Please FAX signed application form back to va Business Finance on 1300 138 187 va Business Finance is pleased to accept your application with a view to providing you with a solution to your

More information

OBIEE 11g Pre-Built Dashboards from Oracle Courtesy: Oracle OBIEE 11g Deployment on Vision Demo Data FINANCIALS

OBIEE 11g Pre-Built Dashboards from Oracle Courtesy: Oracle OBIEE 11g Deployment on Vision Demo Data FINANCIALS FINANCIALS General Ledger The General Ledger module provides insight into key financial areas of performance, including balance sheet, cash flow, budget vs. actual, working capital, liquidity. Dashboard

More information

Regional Workshop: Factoring/Receivable Discounting: a financing tool for agriculture sector Barbados, Savannah Hotel - 4-5 Nov 09

Regional Workshop: Factoring/Receivable Discounting: a financing tool for agriculture sector Barbados, Savannah Hotel - 4-5 Nov 09 Regional Workshop: Factoring/Receivable Discounting: a financing tool for agriculture sector Barbados, Savannah Hotel - 4-5 Nov 09 Workshop report and recommendations The workshop brought together about

More information

How to guarantee collections and payments

How to guarantee collections and payments DOCS How to guarantee collections and payments 01 Introduction 02 Factoring 03 Confirming 04 Forfeiting 05 06 Credit insurance Conclusions and More information Barcelona Activa SAU SPM, 1998-2009 01. Introduction

More information

MARK SCHEME for the October/November 2010 question paper for the guidance of teachers 0452 ACCOUNTING. 0452/22 Paper 2, maximum raw mark 120

MARK SCHEME for the October/November 2010 question paper for the guidance of teachers 0452 ACCOUNTING. 0452/22 Paper 2, maximum raw mark 120 www.xtremepapers.com UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS International General Certificate of Secondary Education MARK SCHEME for the October/November 2010 question paper for the guidance

More information

SAMPLE QUESTION PAPER IN ACCOUNTANCY. Time: Three Hours Maximum Marks: 100

SAMPLE QUESTION PAPER IN ACCOUNTANCY. Time: Three Hours Maximum Marks: 100 SAMPLE QUESTION PAPER IN ACCOUNTANCY Time: Three Hours Maximum Marks: 100 Note: The question paper is divided into two sections A and B. Attempt all questions of Section A and any one question of Section

More information

Using Accounts to Interpret Performance

Using Accounts to Interpret Performance Using s to Interpret Performance ing information is used by stakeholders to judge the performance and efficiency of a business Different stakeholders will look for different things: STAKEHOLDER Shareholders

More information

Financial Statement Ratio Analysis

Financial Statement Ratio Analysis Management Accounting 319 Financial Statement Ratio Analysis Financial statements as prepared by the accountant are documents containing much valuable information. Some of the information requires little

More information

Accounts from Incomplete Records

Accounts from Incomplete Records CHAPTER 9 Accounts from Incomplete Records LEARNING OBJECTIVES After studying the chapter, you will be able to: state the meaning of incomplete records; distinguish between Balance Sheet and Statement

More information

CASH FLOW MANAGEMENT. Marios Tittonis MA

CASH FLOW MANAGEMENT. Marios Tittonis MA CASH FLOW MANAGEMENT Marios Tittonis MA Introduction After I finished my studies (1995) I started working in the firm MGI Gregoriou & co Ltd as an auditor. I have been practicing this profession up to

More information

Teacher Resource Bank

Teacher Resource Bank Teacher Resource Bank GCE Accounting Other Guidance: Layouts and Formulae ACCN1: Layouts ACCN2: Layouts and Formulae ACCN4: Layouts and Formulae (Updated July 2012) The Assessment and Qualifications Alliance

More information

Terms and Techniques to Manage Receivables, Protect Assets and Enhance Working Capital

Terms and Techniques to Manage Receivables, Protect Assets and Enhance Working Capital Terms and Techniques to Manage Receivables, Protect Assets and Enhance Working Capital TERM / TECHNIQUE DEFINITION APPLICATIONS ADVANTAGES DISADVANTAGES Open Account Terms Seller makes shipment and awaits

More information

9. Short-Term Liquidity Analysis. Operating Cash Conversion Cycle

9. Short-Term Liquidity Analysis. Operating Cash Conversion Cycle 9. Short-Term Liquidity Analysis. Operating Cash Conversion Cycle 9.1 Current Assets and 9.1.1 Cash A firm should maintain as little cash as possible, because cash is a nonproductive asset. It earns no

More information

Chapter- 3B Statement of Changes in Financial Position and Working Capital (Fund

Chapter- 3B Statement of Changes in Financial Position and Working Capital (Fund Chapter- 3B Statement of Changes in Financial Position and Working Capital (Fund BSNL, India For Internal Circulation Only 1 Statement of Changes in Financial Position and Working Capital (Fund) I. Statement

More information

POLICY ON COLLECTION OF CHEQUES/INSTRUMENTS AND DISHONOUR OF INSTRUMENTS

POLICY ON COLLECTION OF CHEQUES/INSTRUMENTS AND DISHONOUR OF INSTRUMENTS 1. Introduction POLICY ON COLLECTION OF CHEQUES/INSTRUMENTS AND DISHONOUR OF INSTRUMENTS Keeping in view the technological progress in payment and settlement systems and the qualitative changes in operational

More information

FACTORING. Net Advantage of factoring = Rs.(2,15,753 2,00,000) = Rs.15,753 Decision: As there is net savings, factoring is preferable.

FACTORING. Net Advantage of factoring = Rs.(2,15,753 2,00,000) = Rs.15,753 Decision: As there is net savings, factoring is preferable. FACTORING Pen Pusher FACT1 A company is considering engaging a factor. The following information is available: a) The current average collection period for the company s debtor is 80 days. ½% of debtors

More information

Management of Working Capital

Management of Working Capital International Journal of Computer Science & Management Studies, Vol. 13, Issue 03, May 2013 Management of Working Capital Arti Rani Assistant Professor Kanya Mahavidhyalya, Kharkhoda, Sonepat, Haryana

More information

Ratios from the Statement of Financial Position

Ratios from the Statement of Financial Position For The Year Ended 31 March 2007 Ratios from the Statement of Financial Position Profitability Ratios Return on Sales Ratio (%) This is the difference between what a business takes in and what it spends

More information

APPLICATION FOR FUNDING

APPLICATION FOR FUNDING APPLICATION FOR FUNDING Applicant Details Applicant(s): ABN ACN Business Address: Postal: Business Phone : Business Fax: Email Address: Type of Business / Employment: Yrs Est.: No of Staff: Date Incorp:

More information

Lesson 9: Working Capital Needs of a Value-Added Business

Lesson 9: Working Capital Needs of a Value-Added Business Agricultural Marketing Resource Center Value-added Agriculture Profile Iowa State University November 2007 Lesson 9: Working Capital Needs of a Value-Added Business Funding was provided by the Agricultural

More information

THE WORKING CAPITAL CYCLE IN INTERNATIONAL TRADE

THE WORKING CAPITAL CYCLE IN INTERNATIONAL TRADE THE WORKING CAPITAL CYCLE IN INTERNATIONAL TRADE Introduction The working capital cycle is the period of time which elapses between the points at which cash is used in the supply/production process, to

More information

BUSINESS BOOKKEEPING & ACCOUNTS Designed to produce bookkeeping and accounts personnel trained in the

BUSINESS BOOKKEEPING & ACCOUNTS Designed to produce bookkeeping and accounts personnel trained in the INTERNATIONAL DIPLOMA PROGRAM ON BUSINESS BOOKKEEPING & ACCOUNTS Designed to produce bookkeeping and accounts personnel trained in the MODERN PRACTICAL METHODS OF ACCOUNTING Trained and competent bookkeeping

More information

Examination Paper, Solutions and Examiner s Report. Paper: Corporate Finance & Funding Fast Track

Examination Paper, Solutions and Examiner s Report. Paper: Corporate Finance & Funding Fast Track Examination Paper, Solutions and Examiner s Report Paper: Corporate Finance & Funding Fast Track October 2011 SECTION A Answer ONE COMPULSORY question QUESTION 1 The top executives of Wolfe plc are entitled

More information