हिंदी

How Does Working Capital Affect Both the Liquidity as Well as Profitability of a Business?

Advertisements
Advertisements

प्रश्न

How does working capital affect both the liquidity as well as profitability of a business?

टिप्पणी लिखिए
Advertisements

उत्तर

Working capital is the difference between current assets and current liabilities. It affects both liquidity and profitability of the business.

  • The increase in current assets increases the liquidity position of the business but affects the profitability adversely because the return on current assets is quite low.
  • Low working capital will affect the liquidity of the business which may disturb the day to day operation.

So the working capital should be maintained at such a level that a proper balance could be maintained between profitability and liquidity.

shaalaa.com
  क्या इस प्रश्न या उत्तर में कोई त्रुटि है?
अध्याय 9: Financial Management - EXERCISES [पृष्ठ २४०]

APPEARS IN

एनसीईआरटी Business Studies Part 2 Business Finance and Marketing [English] Class 12
अध्याय 9 Financial Management
EXERCISES | Q 6. | पृष्ठ २४०

वीडियो ट्यूटोरियलVIEW ALL [2]

संबंधित प्रश्न

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:

Financing alternatives


Explain the following as factors affecting the requirements of working capital:

Nature of business


State, with reason, whether the following statement is True or False.

Requirement of working capital does not depend upon any factor.


Ramnath is into the business of assembling and selling of televisions. Recently he has adopted a new policy of purchasing the components on three months credit and selling the complete product in cash. Will it affect the requirement of working capital? Give reason in support of your answer.


Companies with a higher growth potential are likely to


A fixed asset should be financed through


______ refers to the decisions regarding where to invest so as to earn the  highest possible returns on investment.


When XYZ company acquired a toy manufacturing company, it paid a large amount for the goodwill. Which source of business funds of XYZ company was impacted?


How long do fixed assets last?


Which group consists of current assets?


What are decisions about investment in long-term assets called?


Which list contains long-term sources for financing fixed capital?


Which sources should never be used to finance fixed assets?


Why do the large funds involved in capital budgeting require detailed analysis?


How does the Nature of Business affect fixed capital requirement?


What is the effect of a larger Scale of Operations on fixed capital?


What is the effect of higher expected growth on fixed capital?


How does Diversification affect fixed capital?


How does the Level of Collaboration affect each firm's fixed asset investment?


Share
Notifications

Englishहिंदीमराठी


      Forgot password?
Use app×