Correct option is B
The procurement of a loan for working capital involves a systematic and chronological process, usually managed by the finance manager in consultation with financial institutions. The correct sequence is:
- C. Estimation of Working Capital Requirements: The process begins with assessing the short-term financial needs of the business. This includes calculating current assets, liabilities, and forecasting operational expenses.
- B. Submission of Loan Proposal: Once the requirement is assessed, a formal loan proposal is drafted and submitted to banks or financial institutions. This includes financial statements, projections, and justification for the loan.
- A. Coordinating the Verification of Assets: After submission, banks verify the company's financials and assets to assess creditworthiness and collateral adequacy.
- E. Document Execution: Once approved, legal documents including loan agreements, terms, and conditions are signed and executed by both parties.
- D. Creation of Charge on Assets: Finally, a charge is created over the company’s assets (like inventory, receivables, or fixed assets) to secure the loan. This charge is often registered with appropriate authorities such as the Registrar of Companies (ROC).
Information Booster:
Estimation of working capital involves ratio analysis, cash budget preparation, and operating cycle assessment.
A loan proposal must be comprehensive, including promoter background, project viability, collateral details, and repayment schedule.
Asset verification includes physical inspection, valuation, and checking of legal ownership.
Document execution requires authorized signatories, board resolutions, and notarization/stamping.
Charge creation ensures that in case of default, the lender can claim rights over the specified assets.
English
10 Questions
20 Marks
12 Mins
