Financial Calculations & Valuation Intermediate

Calculate Cash Conversion Cycle (DIO, DSO, DPO) & Nayak/Tandon MPBF in Python

Compute Working Capital Cash Conversion Cycle days and Maximum Permissible Bank Finance (MPBF Method II) for SME/Corporate CC limits in Python.

#pandas#numpy

Problem Statement

Assessing SME and corporate Cash Credit (CC) limits requires computing inventory/receivable holding days and Tandon Committee Method II Maximum Permissible Bank Finance (MPBF).

Formula / Core Logic

CCC = DIO + DSO - DPO Working Capital Gap = Current Assets - Other Current Liabilities MPBF (Method II) = WC_Gap - (0.25 * Current Assets)

Installation

pip install pandas numpy

working-capital-cash-conversion-cycle-mpbf-python.py

def assess_working_capital_mpbf(annual_sales, cogs, inventory, receivables, payables, total_ca, other_cl):
    dio = (inventory / cogs) * 365
    dso = (receivables / annual_sales) * 365
    dpo = (payables / cogs) * 365
    ccc_days = dio + dso - dpo
    
    wc_gap = total_ca - other_cl
    min_margin_25pct = 0.25 * total_ca
    mpbf_limit = max(0.0, wc_gap - min_margin_25pct)
    nayak_turnover_limit = 0.20 * annual_sales
    return {'CCC_Days': round(ccc_days, 1), 'Tandon_MPBF_Limit': round(mpbf_limit, 2), 'Nayak_20Pct_Turnover_Limit': round(nayak_turnover_limit, 2)}

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Frequently Asked Questions

Q: When is Nayak Committee Turnover Method used instead of Tandon MPBF?

Nayak Committee norms (20% of projected turnover as bank finance) are typically used for MSME working capital limits up to ₹5 Crore.