IIBF CCP Formula Sheet
Ten formulas, what each one is for, and a worked example.
The CCP exam is built around a credit officer's arithmetic: reading a balance sheet, sizing a working capital limit and judging whether a project can repay. These ten formulas cover most of the calculation questions.
Each matches the definition used on this site's CCP topic pages, so you can go deeper on any of them.
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The 10 Formulas
1
Formula
Current ratio
Expression
Current assets ÷ Current liabilities
Use it for
Short-term liquidity. 1.33 is the benchmark under the second MPBF method.
2
Formula
Debt-equity ratio
Expression
Long-term debt ÷ Tangible net worth
Use it for
Leverage in term-loan appraisal.
3
Formula
TOL/TNW
Expression
Total outside liabilities ÷ Tangible net worth
Use it for
Overall leverage, including current liabilities.
4
Formula
DSCR
Expression
(PAT + Depreciation + Interest) ÷ (Interest + Instalment)
Use it for
Whether project cash flows cover term-loan servicing.
5
Formula
Interest coverage ratio
Expression
EBIT ÷ Interest
Use it for
How many times profit covers interest.
6
Formula
Working capital gap
Expression
Current assets − Current liabilities other than bank borrowings
Use it for
The funding need the bank and borrower share.
7
Formula
MPBF, second method (Tandon)
Expression
MPBF = (75% × Current assets) − Other current liabilities
Use it for
Maximum permissible bank finance for larger borrowers.
8
Formula
Turnover method (Nayak)
Expression
Bank finance = 20% of projected annual turnover
Use it for
Working capital limits for MSE borrowers. Need is 25%, with a 5% margin from the borrower.
9
Formula
Operating cycle
Expression
Days of raw material + WIP + finished goods + receivables − creditors
Use it for
How long cash is tied up. Daily cost × cycle days = working capital need.
10
Formula
Break-even sales
Expression
Fixed costs ÷ P/V ratio
Use it for
Sales at which profit is zero, where P/V = Contribution ÷ Sales.
| # | Formula | Expression | Use it for |
|---|---|---|---|
| 1 | Current ratio | Current assets ÷ Current liabilities | Short-term liquidity. 1.33 is the benchmark under the second MPBF method. |
| 2 | Debt-equity ratio | Long-term debt ÷ Tangible net worth | Leverage in term-loan appraisal. |
| 3 | TOL/TNW | Total outside liabilities ÷ Tangible net worth | Overall leverage, including current liabilities. |
| 4 | DSCR | (PAT + Depreciation + Interest) ÷ (Interest + Instalment) | Whether project cash flows cover term-loan servicing. |
| 5 | Interest coverage ratio | EBIT ÷ Interest | How many times profit covers interest. |
| 6 | Working capital gap | Current assets − Current liabilities other than bank borrowings | The funding need the bank and borrower share. |
| 7 | MPBF, second method (Tandon) | MPBF = (75% × Current assets) − Other current liabilities | Maximum permissible bank finance for larger borrowers. |
| 8 | Turnover method (Nayak) | Bank finance = 20% of projected annual turnover | Working capital limits for MSE borrowers. Need is 25%, with a 5% margin from the borrower. |
| 9 | Operating cycle | Days of raw material + WIP + finished goods + receivables − creditors | How long cash is tied up. Daily cost × cycle days = working capital need. |
| 10 | Break-even sales | Fixed costs ÷ P/V ratio | Sales at which profit is zero, where P/V = Contribution ÷ Sales. |
What the Symbols Mean
- TNW
- Tangible net worth: share capital plus reserves, minus intangible assets.
- OCL
- Other current liabilities: current liabilities excluding bank borrowings.
- PAT
- Profit after tax.
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Worked Example: DSCR
In a year, a project earns PAT of ₹30 lakh, with depreciation of ₹20 lakh and term-loan interest of ₹12 lakh. The instalment due is ₹40 lakh.
- 1
Cash available for debt service
30 + 20 + 12 = ₹62 lakh.
- 2
Debt service due
12 + 40 = ₹52 lakh.
- 3
Divide
DSCR = 62 ÷ 52 ≈ 1.19. Banks usually look for an average DSCR comfortably above 1.
Watch What Counts as a Current Liability
Term-loan instalments due within 12 months are current liabilities. Leaving them out inflates the current ratio, and exam options are often built on that mistake.
FAQs
What is the difference between the first and second MPBF methods?expand_more
The first method is 75% of the working capital gap. The second, stricter one is 75% of current assets minus other current liabilities.
Who does the turnover method apply to?expand_more
MSE borrowers with working capital limits up to ₹5 crore. Banks set their own cut-offs within that.
Why add interest back in DSCR?expand_more
Interest is a debt-service outflow, so it goes in the denominator. To avoid counting it twice, it's added back to the cash available in the numerator.
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