Abstract 

This case sets the context of a fast growing company; it is financing and working capital requirements and important aspects the banker should consider while extending the facilities and how the banker can structure working capital solutions. The case is intended to challenge the students and practising executives to understand the financial statements of a corporate entity from a banker’s perspective, working capital loan decision process, and assessment of working capital requirements. It provides a comprehensive understanding about the types of financial products being extended by banks to a large corporate entity, especially in working capital finance. These include a demand loan of working capital, overdraft/cash credit pre- and post-sales finance against exports, and finance against instruments such as bills discounting and extending financial support on the basis of letter of credit (LC) mechanism. Students are expected to assume the position of the banker and raise various questions to the borrowing firm and utilize effectively the credit monitoring tools such as review of current account transactions, funds flow statement, financial statement analysis, and so on. This case helps in understanding the intriguing relationship between accounting profits, cash flows, operating cycle, and working capital of the company. Finally, the case concludes with structuring a working capital finance solution.

Learning Objective 

 Provides a comprehensive understanding about the types of financial products being provided by banks to a large corporate entity in financing working capital. These include finance against commercial bills and extending financial support on the basis of letter of credit (LC) mechanism.

• Application of financial statement analysis techniques in loan appraisal and credit monitoring
• Understanding the relationship between accounting profits, cash flows, operating cycle, and working capital of a company
• Structuring of working capital finance solution