Advertisements
Advertisements
प्रश्न
How does working capital affect both the liquidity as well as profitability of a business?
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.
APPEARS IN
संबंधित प्रश्न
Explain the following as factor affecting the requirements of fixed capital:
Scale of operations
Explain the following as factor affecting the requirements of fixed capital:
Choice of technique
Explain the following as factors affecting the requirements of working capital:
Scale of operations
Explain the following as factors affecting the requirements of working capital:
Seasonal factors
Explain the following as factors affecting the requirements of working capital:
Production cycle
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.
State, with reason, whether the following statement is True or False.
Requirement of working capital does not depend upon any factor.
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’.
Write a word or a term or a phrase which can substitute the following statement :
The difference between current assets and current liabilities.
Companies with a higher growth potential are likely to
Higher working capital usually results in :
Higher dividend per share is associated with
What are the important determinants of working capital requirement?
Which of the following factors highlight the importance of capital budgeting decisions
Net working capital may be defined as the:
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.
Fixed capital is financed through:
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?
