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Question
Explain the following as factor affecting the requirements of fixed capital:
Scale of operations
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Solution
The scale of operations: A company with large-scale operations will require larger fixed assets in the form of plants, land and building.
Larger organisation ⇒ Higher investment in fixed assets
Small organisation ⇒ Lower investment in fixed assets
RELATED QUESTIONS
Match the pairs
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Group A |
Group B |
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a. Fixed Capital |
1. Owned Capital |
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b, Overdraft facility |
2. Bearer document |
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c. Share certificate |
3. Investment in fixed assets |
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d. Debentures |
4. Current Account |
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e. Return on shares |
5. Application Money |
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6. Dividend |
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7. Investment in current assets |
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8. Borrowed capital |
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9. Savings Account |
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10. Registered Document |
Explain briefly any four factors that affect the working capital requirement of a company.
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:
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.
How does working capital affect both the liquidity as well as profitability of a business?
What is meant by capital gearing ratio?
Why is working capital also known as circulating capital?
Higher working capital usually results in :
Current assets are those assets which get converted into cash
Higher dividend per share is associated with
Current assets of a business firm should be financed through
______ of a firm refers to those assets which can be converted into cash or cash equivalents in a short period of time.
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?
