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प्रश्न
Answer the question.
Briefly explain any four types of working capital required by a business concern.
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उत्तर
Working capital means the capital invested in working assets or current assets such as cash, stock of goods, debtors and short term investments, etc.
The various types of working capital are:
Permanent Working Capital: It refers to the minimum amount of working capital required permanently to operate the minimum level of business activity. It determines the financing requirement in the case of fixed assets is simply the cost of the asset. It is of two types: Initial and Regular working capital.
Variable Working Capital: It is the difference between networking capital and permanent working capital. The amount of temporary’ working capital depends upon the extent of extra demand in season. It is of two types: seasonal and special working capital.
Gross Working Capital: Gross working capital refers to the total amount of funds invested in the current assets.
Gross Working Capital = Book value of current assets Working Capital: Networking capital means the excess of current assets over current liabilities. Current assets include cash at bank, sundry’ debtors, cash in hand, bills receivable, etc. Current liabilities include bills payable, sundry creditors, short term loans, etc.
Net Working Capital = Current assets – Current liabilities
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संबंधित प्रश्न
Explain the following as factor affecting the requirements of fixed capital:
Scale of operations
Explain the following as factors affecting the requirements of working capital:
Nature of business
Explain the following as factors affecting the requirement of working capital:
The credit allowed and availed
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.
Why is working capital also known as circulating capital?
Explain any four factors that affect the capital structure of a company.
Current assets of a business firm should be financed through
Assertion (A): A commercial bill is a bill of exchange used to finance the working capital requirements of business firms.
Reason (R): Commercial bill is a short-term, negotiable, self-liquidating instrument which is used to finance the credit sales of firms.
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 ______.
Dhaval Acharya, after acquiring a bachelor’s degree in Hotel Management joined his father’s chain of vegetarian restaurants in Ahmednagar. Being young and enterprising, he suggested his father to add a new section of vegetarian bakery items which required an investment of ₹ 5 crores. His father Mr. Aariketh Acharya suggested him to take the decision with caution and understood everything comprehensively as bad decision may damage the financial fortune of business.
Identify the decision suggested by Mr. Aariketh Acharya. State by giving any three reasons as to why he must have advised his son to take decision with caution.
