How do you assess working capital limits, including fund-based and non-fund-based limits?

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Accepted Answer

Assessing working capital limits involves analyzing the company's financial statements, cash flow projections, industry trends, and risk factors.

Reviewing the company's financial statements to understand its current financial position
Analyzing cash flow projections to assess the company's ability to meet its short-term obligations
Considering industry trends and economic conditions that may impact the company's working capital needs
Evaluating risk factors such as market volatility, customer concentration, and supplier relationships
Determining fund-based limits based on the company's borrowing capacity and collateral
Setting non-fund-based limits for activities like letters of credit or bank guarantees

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