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Chapters
1: Business Environment
UNIT-2 : FINANCING
▶ 2: Capital - Fixed and Working
3: Sources of Financial for a Join stock Company
4: Banking - Latest Trends
UNIT-3 : MANAGEMENT
5: Management - Meaning, Nature and Importance
6: Principles of Management
7: Functions of Management and Coordination
8: Planning
9: Organising
10: Staffing
11: Directing
12: Controlling
UNIT-4 : MARKETING
13: Marketing - Concept and functions
14: Marketing Mix
15: Consumer Protection
![C. B. Gupta solutions for कॉमर्स वॉल्यूम २ [अंग्रेजी] कक्षा १२ आईएससी chapter 2 - Capital - Fixed and Working - Shaalaa.com](/images/commerce-volume-2-english-class-12-isc_6:2887ba73d35f4510a36234795e6cdd48.jpg "C. B. Gupta solutions for कॉमर्स वॉल्यूम २ [अंग्रेजी] कक्षा १२ आईएससी chapter 2 - Capital - Fixed and Working")
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Solutions for Chapter 2: Capital - Fixed and Working
Below listed, you can find solutions for Chapter 2 of CISCE C. B. Gupta for कॉमर्स वॉल्यूम २ [अंग्रेजी] कक्षा १२ आईएससी.
C. B. Gupta solutions for कॉमर्स वॉल्यूम २ [अंग्रेजी] कक्षा १२ आईएससी 2 Capital - Fixed and Working EXERCISES [Page 42]
Short Answer Type Questions
Define business finance.
Distinguish between gross working capital and net working capital.
What is meant by capital structure?
What is meant by fixed capital?
What is working capital?
List any three factors affecting the Working Capital requirement of a company.
Why is working capital also known as circulating capital?
Essay Type Questions
Explain the nature of business finance.
Explain the importance of business finance.
Discuss finance for different types of business firms.
Why is financial planning necessary?
Explain the factors influencing financial planning.
Discuss the factors affecting capital structure of a company.
What are the factors affecting requirement of fixed capital?
Describe various types of working capital.
Explain the importance of adequate working capital for business.
List any three factors affecting the Working Capital requirement of a company.
Distinguish between Fixed capital and Working capital.
What is meant by fixed capital?
What are the factors affecting requirement of fixed capital?
Briefly explain any five factors to be considered while preparing a suitable capital plan.
C. B. Gupta solutions for कॉमर्स वॉल्यूम २ [अंग्रेजी] कक्षा १२ आईएससी 2 Capital - Fixed and Working QUESTION BANK [Pages 42 - 47]
What is business finance?
Discuss finance for different types of business firms.
What is meant by financial planning?
What is meant by capital structure?
Discuss the factors affecting capital structure of a company.
Define Fixed Capital.
What are the factors affecting requirement of fixed capital?
What are the factors affecting requirement of fixed capital?
Give two sources of fixed capital or long-term capital.
What is working capital?
What is working capital?
Explain the importance of adequate working capital for business.
Identify two sources of working capital or short-term capital.
Explain the meaning of gross working capital.
What is net working capital?
What is Variable Working Capital?
Distinguish between Fixed capital and Working capital.
Discuss the role of ‘Working Capital’ in a business firm.
Answer in one sentence.
Define working capital.
List any three factors affecting the Working Capital requirement of a company.
List any three factors affecting the Working Capital requirement of a company.
What is working capital?
List any three factors affecting the Working Capital requirement of a company.
Classify the following into fixed capital and working capital.
- Cash at bank
- Plant and machinery
- Book debts
- Work-in-progress
- Motor vehicles
- Stock of raw materials
- Cash in hand
- Computers
C. B. Gupta solutions for कॉमर्स वॉल्यूम २ [अंग्रेजी] कक्षा १२ आईएससी 2 Capital - Fixed and Working QUESTIONS [Pages 47 - 53]
MULTIPLE CHOICE QUESTIONS
The following is true about Fixed capital and Working capital requirements of a business firm:
A business firms operating on large scale will require more fixed capital and less working capital.
A business firms operating on large scale will require less fixed capital and more working capital.
A business firms operating on large scale will require more fixed capital as well as more working capital.
A business firms operating on large scale will require less fixed capital as well as less working capital.
Which among the following is not an essential ingredient of sound working capital management?
Efficient cash management
Receivables management
Inventory management
Surplus management
The financial planning begins with ______.
Appointment of financial manager
Deciding about requirements of fixed and working capital.
Preparing budgets.
Preparing sales forecast.
A favourable financial leverage means ______.
Return on Investment is lower than cost of debts
Return on Investment is equal to cost of debts
Return on Investment is higher than cost of debt
Cost of debt is nil
Under what situation Earning per share of company falls with the increased use of debt?
When company's Return on Investment is equal to cost of debt.
When company's Return on Investment is more than cost of debt.
When company’s Return on Investment is less than cost of debt.
More use of equity than debt.
Trading on Equity takes place when:
- Return on Investment is less than rate of interest on debt.
- Return on Investment is more than the rate of interest on debt.
- Company’s earnings are stable and regular to pay at least the fixed interest on debt.
- Company has sufficient fixed assets to be kept as security with the lenders.
Which of the above statements are correct?
(i), (iii), (iv)
(ii), (iii), (iv)
(i), (ii), (iii)
All are correct
Which of the following statements is correct about factors affecting working capital requirements?
Higher is the lead time, lower the quantity of material to be stored and higher is the amount of working capital requirement.
A tight credit policy results in higher amount of debtors, increasing the amount of working capital.
Working Capital requirement is higher in firms with longer processing cycle and lower in firms with shorter processing cycle.
The working capital requirement of a business becomes lower with higher rate of inflation.
It is essentially the preparation of a financial blueprint of an organisation’s future operations. Identify the related concept.
Financial management
Financial planning
Working capital decisions
Fixed capital decisions
As the financial leverage of a company increases, it leads to:
A decline in the cost of funds but an increase in the financial risk
An increase in the cost of funds but a decline in the financial risk
Both an increase in the cost of funds and financial risk
Both a decline in the cost of funds and financial risk
If the rate of earnings on investment for a company is 16%, a situation of unfavourable financial leverage will be said to arise when the rate of interest payable on debt capital is ______.
More than 16%
Less than 16%
Equal to 16%
None of the above
Which of the following statements is not true with regard to use of fixed capital?
It affects the long-term growth of the business.
Large amount of funds is involved.
The business risk involved is low.
The investment decisions are irreversible.
Name the process that enables the management to foresee the fund requirements, both the quantum as well as the timing.
Financial management
Fixed capital decisions
Working capital decisions
Financial planning
Under which of the following conditions the fixed capital requirements of a business is not likely to be low?
When the undertaking is providing public utilities
When the labour-iatensive production technique is used
When the scope of purchasing fixed assets on lease is low
When the growth prospects of the firm are low
The working capital requirement of a business is not likely to be high when?
The nature of business is trading
Scale of operation of business is large
It is difficult to procure raw material
During period of depression
Which of the following is not an objective of financial planning?
Ensuring enough funds are available at the right time
Ensuring excess availability of funds at the right time
Ensuring smooth business operations
All of the above
Which of the following is not an importance of financial planning?
It helps in avoiding business shocks and surprises.
If helps in co-ordinating various business functions.
If helps to reduce waste, duplication of efforts and gaps in planning.
It tries to delink the present with the future.
The working capital requirement of a business is not likely to be low when
The scale of the business operation is small
When the growth prospects of the business are not stagnant
When the raw material is easily available
When the organisation buys goods on credit and sells them in cash
Under which of the following circumstances the fixed capital requirement of a business is not likely to be high?
When the undertaking is manufacturing goods
Capital intensive techniques of production are used
The growth prospects of a company a high
When the financial alternatives are easily available
Read the given passage and answer the following questions (Q.19-Q.20)
Read the given passage and answer the following question:
|
VTM Textile Mills is one of the largest manufacturers of various types of textile products from Ahmedabad, Gujarat. The company is equipped with state-of-the-art dyeing, printing and processing and garmenting facilities. Due to the prolonged pandemic and slackness in the market demand, the company is facing shortage of funds. The company has started preliminary work for expansion of textile manufacturing capacity in their existing plant at Ahmedabad as well as installation of a new manufacturing unit at Panipat, Haryana at an estimated cost of ₹ 10 Crore. The company has decided to issue equity shares for this purpose. Also, the company needs funds for meeting its day-to-day expenses like daily wages and overheads etc. The finance manager of the company approached one of its suppliers to grant two months credit on purchase of raw cotton. This would enable the company to get cotton supplies without making immediate payments. |
“The company has started preliminary work for expansion of textile manufacturing capacity in their existing plant at Ahmedabad as well as installation of a new manufacturing unit at Panipat, Haryana at an estimated cost of ₹ 10 Crore”
Which financial need of the business is highlighted in the given lines?
Fixed capital requirements
Working capital requirements
Both fixed capital requirements and working capital requirements
Neither fixed capital requirements nor working capital requirements
Read the given passage and answer the following question:
|
VTM Textile Mills is one of the largest manufacturers of various types of textile products from Ahmedabad, Gujarat. The company is equipped with state-of-the-art dyeing, printing and processing and garmenting facilities. Due to the prolonged pandemic and slackness in the market demand, the company is facing shortage of funds. The company has started preliminary work for expansion of textile manufacturing capacity in their existing plant at Ahmedabad as well as installation of a new manufacturing unit at Panipat, Haryana at an estimated cost of ₹ 10 Crore. The company has decided to issue equity shares for this purpose. Also, the company needs funds for meeting its day-to-day expenses like daily wages and overheads etc. The finance manager of the company approached one of its suppliers to grant two months credit on purchase of raw cotton. This would enable the company to get cotton supplies without making immediate payments. |
“Also, the company needs funds for meeting its day-to-day expenses like daily wages and overheads etc.”
Which financial need of the business is highlighted in the given lines?
Fixed capital requirements
Working capital requirements
Both Fixed capital requirements and Working capital requirements
Neither Fixed capital requirements and Working capital requirements
ASSERTION-REASON QUESTIONS In the questions given below, there are two statements marked Assertion (A) and Reason (R). Read the statements and choose the correct option:
Assertion (A): Financial planning means estimating the requirements of a business and determining source of funds.
Reason (R): Capital Structure refers to the mix between owners and borrowed funds.
Both Assertion (A) and Reason (R) are True and Reason (R) is the correct explanation of Assertion (A).
Both Assertion (A) and Reason (R) are True and Reason (R) is not the correct explanation of Assertion (A).
Assertion (A) is True but Reason (R) is False.
Assertion (A) is False but Reason (R) is True.
Assertion (A): Finance is the life blood of business.
Reason (R): Finance is essential for smooth running of the business.
Both Assertion (A) and Reason (R) are True and Reason (R) is the correct explanation of Assertion (A).
Both Assertion (A) and Reason (R) are True and Reason (R) is not the correct explanation of Assertion (A).
Assertion (A) is True but Reason (R) is False.
Assertion (A) is False but Reason (R) is True.
Assertion (A): Working capital should be optimum, so that neither profitability nor liquidity is affected.
Reason (R): If working capital is more than required it will increase the liquidity and profitability.
Both Assertion (A) and Reason (R) are True and Reason (R) is the correct explanation of Assertion (A).
Both Assertion (A) and Reason (R) are True and Reason (R) is not the correct explanation of Assertion (A).
Assertion (A) is True but Reason (R) is False.
Assertion (A) is False but Reason (R) is True.
CASE/PARAGRAPH BASED QUESTIONS
|
The Directors of Sherlock Ltd., which runs a famous fashion jewellery brand in India, have decided to expand their business activities globally especially targeting other Asian countries. Their Balance Sheet as of 31st March 2020 shows Equity Share Capital of ₹ 5 Crore, Preference Share Capital of ₹ 2 Crore and Borrowed Funds of ₹ 8 Crore. Their Balance Sheet is also reflecting Retained Earnings of ₹ 80 Lakh. The Directors are very much aware of the risks involved in International Business. Also, they are already under so much fixed obligation of payment of interest. But since they enjoy good reputation in the finance market hence various sources of finance are easily available to them. So, keeping all these factors in mind, they decided to increase their production for their international venture. For this, they need to increase the stock of raw material at an estimated cost of ₹ 1 crore. |
- Funds required to purchase the stock of raw material in order to increase the production is one of the examples of ______. (1)
- How will the ‘method of production’ and ‘expansion plans’ of Sherlock Ltd. affect its fixed capital requirements? (2)
- On the basis of permanency, describe the types of Working Capital. (2)
- Discuss the significance of working capital in businesses. (3)
| Raghav is trying to co-ordinate the functioning of various departments like sales and production. He has been trying to do this with the help of a concept of financial management. He quite often calls people of both departments and tells them to work within means. He has even prescribed a budget for it. During the time, when he is doing a lot of analysis he connects the decision of present with the outcomes of future. This can be especially seen in two of the prominent decisions. One is the investment and the other is the financing decision- so the interlinking of these two decisions is assumed by him. When the year ends it is easy for him to take some strong decisions. This happens because he is able to evaluate the performance of various departments in terms of revenue generated and the expenses incurred. No business is risk proof. However, he knows that at least business shocks which a business can suffer can be minimised thus laying foundation for a better future. His involvement in the work is definitely appreciable. |
- Which concept of financial management has been highlighted in the above case? (1)
- Identify the scope of this concept highlighted in the above case. (3)
- Discuss the importance of the identified concept. (2)
- How would you define the concept highlighted in the above case? (2)
| Somnath Ltd. is engaged in the business of export of garments. In the past, the performance of the company had been upto the expectations. In line with the latest technology, the company decided to upgrade its machinery. For this, the Finance Manager, Dalmia estimated the amount of funds required and the timings. This will help the company in linking the investment and the financing decisions on a continuous basis. Dalmia therefore, began with the preparation of a sales forecast for the next four years. He also collected the relevant data about the profit estimates in the coming years. By doing this, he wanted to be sure about the availability of funds from the internal sources of the business. For the remaining funds he is trying to find out alternative sources from outside. |
- Identify the financial concept discussed in the above para. (1)
- Also state the scope/objectives to be achieved by the use of financial concept, so identified. (3)
- Discuss the factors which the Finance Manager should keep in mind while undertaking the process of the financial concept identified in part (a). (4)
| Shalini, after acquiring a degree in Hotel Management and Business Administration, took over her family food processing company of manufacturing pickles, jams and squashes. The business had been established by her great grandmother and was doing reasonably well. However, the fixed operating costs of the business were high and the cash flow position was weak. She wanted to undertake modernisation of the existing business to introduce the latest manufacturing processes and diversify into the market of chocolates and candies. She was very enthusiastic and approached a finance consultant, who told her that approximately ₹ 50 lakh would be required for undertaking the modernisation and expansion programme. He also informed her that the stock market was going through a bullish phase. |
- Keeping the above considerations in mind, name the source of finance Shalini should not choose for financing the modernisation and expansion of her food processing business. Give one reason in support of your answer. (2)
- Explain any two other factors, apart from those stated in the above situation, which Shalini should keep in mind while taking this decision. (3)
- With reference to equity and debt capital, what is Trading on Equity? (1)
- State the circumstances when Trading on Equity is desirable. (2)
Read the following text and answer the following questions 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 ₹ 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 cheaperdebt 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. |
- Identify and define the concept of Financial Management as advised by Mr. Ghosh in the above situation. (2)
- In the above case, why did Mr. Ghosh suggested to raise more fund from debt? (1)
- “Mr. Ghosh advised him about the judicious mix of equity (40%) and Debt (60%)”. What is the proportion of debt in the overall capital called? Explain the concept with a numerical example. (3)
- What is the practice of employing more of cheaper debt to enhance the Earning per share called? Enumerate any one pre-requisite of such practice. (2)
FILL IN THE BLANKS
Availability of ______ determines the scale of operations of business.
______ planning involves deciding when, how and why of financial activities.
The ratio between equity (owned funds) and debt (borrowed funds) is called ______ gearing.
Fixed capital is raised through ______ sources of finance.
Working capital is also known as ______ or ______ capital.
A growing and expanding firm requires more ______ than a stagnant firm.
TRUE OR FALSE.
The term ‘capital’ refers to the investment made in an enterprise for the purpose of earning profits.
TRUE OR FALSE.
Long-term loans for working capital may be obtained from commercial banks.
TRUE OR FALSE.
Capital structure means the composition or make up of the amount of short-term funds.
TRUE OR FALSE.
Working capital refers to the funds required for acquisition of fixed assets.
TRUE OR FALSE.
When a liberal credit policy is followed, more working capital is required.
TRUE OR FALSE.
Cyclical changes create emergency demands for fixed capital.
Solutions for 2: Capital - Fixed and Working
C. B. Gupta solutions for कॉमर्स वॉल्यूम २ [अंग्रेजी] कक्षा १२ आईएससी chapter 2 - Capital - Fixed and Working
Shaalaa.com has the CISCE Mathematics कॉमर्स वॉल्यूम २ [अंग्रेजी] कक्षा १२ आईएससी CISCE solutions in a manner that help students grasp basic concepts better and faster. The detailed, step-by-step solutions will help you understand the concepts better and clarify any confusion. C. B. Gupta solutions for Mathematics कॉमर्स वॉल्यूम २ [अंग्रेजी] कक्षा १२ आईएससी CISCE 2 (Capital - Fixed and Working) include all questions with answers and detailed explanations. This will clear students' doubts about questions and improve their application skills while preparing for board exams.
Further, we at Shaalaa.com provide such solutions so students can prepare for written exams. C. B. Gupta textbook solutions can be a core help for self-study and provide excellent self-help guidance for students.
Concepts covered in कॉमर्स वॉल्यूम २ [अंग्रेजी] कक्षा १२ आईएससी chapter 2 Capital - Fixed and Working are Sources of Finance for Sole Trader, Sources of Finance for Partnership, Sources of Finance for Joint Stock Company, Sources of Finance for Financial Planning, Concept of Fixed and Working Capital, Factors Affecting Fixed and Working Capital Requirements, Comparison Between Fixed and Working Capital, Overview of Capital - Fixed and Working.
Using C. B. Gupta कॉमर्स वॉल्यूम २ [अंग्रेजी] कक्षा १२ आईएससी solutions Capital - Fixed and Working exercise by students is an easy way to prepare for the exams, as they involve solutions arranged chapter-wise and also page-wise. The questions involved in C. B. Gupta Solutions are essential questions that can be asked in the final exam. Maximum CISCE कॉमर्स वॉल्यूम २ [अंग्रेजी] कक्षा १२ आईएससी students prefer C. B. Gupta Textbook Solutions to score more in exams.
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