● The maximum permissible bank borrowings as per the first and second method can be ascertained as follows:

Particulars 1st Method 2nd Method A. Current Assets (CA) 1,00,000 1,00,000 B. Current Liabilities excluding bank borrowings (CL)

20,000 20,000 C. Working Capital Gap

(CA − CL) or (A − B)

80,000 80,000 D. Borrowers contribution 25% of C or Working Capital gap through long-term source, i.e.

20,000 25% of A or Current Assets through long-term source, i.e.

25,000 E. Maximum Permissible Bank Finance (MPBF) (C − D)

60,000 55,000