CMA Report Preparation


CMA stands for Credit Monitoring Arrangement report wherein the past and projected financial performance of a business is compiled in a certain format with all the required financial metrics and ratios to help Bankers and Financial Analysts ascertain the financial health of a business. Most Bankers request a business loan applicant to prepare CMA report to understand the flow and application of funds in a business. A professionally prepared CMA report can improve the chances of obtaining bank loan. It is the largest business services platform in India, offering a variety of services like CMA report preparation, company incorporation, trademark registration, GST registration, income tax filing and more.We can help you prepare a CMA report for your business.

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Cash & Bank Balance should be shown at the lowest level as the Bank will not finance these items. The Bank shall finance against the drawing power which is based on stocks and debtors less creditors but of course the balance of cash and bank shall form part of the current assets and will govern the MPBF, yet higher cash and bank balance may not serve the purpose as even if this will improve the current ratio but will not help the drawing power.

Fixed Deposits: There is serious disagreement with a few Banks for treatment of fixed deposits which are kept by them against the margin for LC/ BG. There are Bank who consider the same as ‘non current assets’ whereas a few Banks allow the same to be categorized under the current assets.

Receivables:

Book debts other than discounted against LC can be shown as current assets. The debtors beyond six months are normally not considered as current assets. It holds true also as drawing power will not be available on the debts beyond six months. In case of export receivables maximum holding allowed in 180 days. The holding period has to be in consonance with the past holding period or as per industry norms. A long cycle will depend on the nature of the industry; The holding period for jewellery and carpet cannot be treated on the same footing; Margin on Receivables: Normally Banks provide 35% to 50% margin on the receivables while calculating the drawing power, whereas for CMA margin at 25% is provided. Thus even if MPBF is higher, the drawing power is lower.

Export Receivables: As mentioned above, export receivables are given maximum period of 180 days. On such receivables no margins are prescribed, yet 100% recovery is expected in such cases as such matters are closely kept under surveillance of RBI;

Ratio analysis:

This is the last statement which gives the key ratios to the banker based on the CMA data prepared and submitted to the bank for finance. Basic key ratios are Gross profit ratio, net profit ratio, current ratio, DP limit, MPBF, Net worth, ratio of net worth with Liabilities, quick ratio, stock turnover, asset turnover, fixed asset turnover, current asset turnover, working capital turnover, Debt Equity ratio etc.