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प्रश्न
Explain the following as factors affecting the requirements of working capital:
Production cycle
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उत्तर
Production cycle: A longer production cycle will require high working capital as it will take more time to convert raw material into finished products. On the other hand, a small production cycle will require less working capital.
Long production cycle ⇒ High working capital
Small production cycle ⇒ Low working capital
संबंधित प्रश्न
Match the pairs
|
Group A |
Group B |
|
a. Fixed Capital |
1. Owned Capital |
|
b, Overdraft facility |
2. Bearer document |
|
c. Share certificate |
3. Investment in fixed assets |
|
d. Debentures |
4. Current Account |
|
e. Return on shares |
5. Application Money |
|
|
6. Dividend |
|
7. Investment in current assets |
|
|
8. Borrowed capital |
|
|
9. Savings Account |
|
|
10. Registered Document |
Explain briefly any four factors that affect the working capital requirement of a company.
Explain the following as factor affecting the requirements of fixed capital:
Choice of technique
Explain the following as factors affecting the requirements of fixed capital:
Technology upgradation
Varunica Ltd., a reputed truck manufacturing company, needs rupees twenty crores as additional capital to expand its business. Mr. Alind Jindal, the CEO of the company, wants to raise funds through equity. The Finance Manager, Mr. Nikhil Sachdeva, suggests that the existing shareholders be offered the privilege to subscribe to new issue of shares as per the terms and conditions of the company which was agreed by Mr. Alind Jindal.
Name the method through which the company decided to raise additional capital.
Amrit is running a ‘transport service’ and earning good returns by providing this service to industries. Giving reason, state whether the working capital requirement of the firm will be ‘less’ or ‘more’.
Answer the question.
Briefly explain any four types of working capital required by a business concern.
Companies with a higher growth potential are likely to
Current assets are those assets which get converted into cash
Current assets of a business firm should be financed through
Working capital is calculated as?
______ decision involves the decision regarding the distribution of profit or surplus of the company.
Read the following text and answer the following question on the basis of the same:
Mr. A. Bose is running a successful business. Mr. Bose is the owner of R. K. Cement Ltd. Mr. Bose decided to expand his business by acquiring a Steel Factory. This required an investment of Rs. 60 crores. To seek advice in this matter, he called his financial advisor Mr. T. Ghosh who advised him about the judicious mix of equity (40%) and Debt (60%). Employ more of cheaper debt may enhance the EPS. Mr. Ghosh also suggested him to take loan from a financial institution as the cost of raising funds from financial institutions is low. Though this will increase the financial risk but will also raise the return to equity shareholders. He also apprised him that issue of debt will not dilute the control of equity shareholders. At the same time, the interest on loan is a tax-deductible expense for computation of tax liability. After due deliberations with Mr. Ghosh, Mr. Bose decided to raise funds from a financial institution.
"Mr. T. Ghosh who advised him about the judicious mix of equity (40%) and Debt (60%)." The proportion of debt in the overall capital is called ______.
Why do capital budgeting decisions matter for long-term growth?
How does the Nature of Business affect fixed capital requirement?
How does Choice of Technique affect fixed capital requirement?
How does fast obsolescence under Technology Upgradation affect fixed capital requirement?
What is the effect of higher expected growth on fixed capital?
How does leasing affect fixed capital requirement?
