English

Explain the Following as Factors Affecting the Requirement of Working Capital: Credit Allowed and Availed

Advertisements
Advertisements

Question

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

The credit allowed and availed

Advertisements

Solution

The credit allowed and availed: Credit means allowing the sale of goods without immediate cash payment, and hence, the number of debtors increases and in turn the requirement of working capital will increase. A strict credit policy will reduce the requirement of working capital.
Credit allowed

Liberal credit policy ⇒ High working capital

Strict credit policy ⇒ Low working capital

Credit availed

Difficult to avail credit from suppliers ⇒ High working capital

Easy to avail credit from suppliers ⇒ Low working capital

shaalaa.com
  Is there an error in this question or solution?
2013-2014 (March) Foreign Set 2

Video TutorialsVIEW ALL [2]

RELATED QUESTIONS

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:

Technology upgradation


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?


Write a word or a term or a phrase which can substitute the following statement :

The difference between current assets and current liabilities.


Answer the question.
Briefly explain any four types of working capital required by a business concern.


Explain any four factors that affect the capital structure of a company.


Companies with a higher growth potential are likely to


Current assets are those assets which get converted into cash


Higher dividend per share is associated with


A fixed asset should be financed through


Which of the following factors highlight the importance of capital budgeting decisions


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


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 ______.


Through which sources must fixed capital be financed?


Which sources should never be used to finance fixed assets?


How does fast obsolescence under Technology Upgradation affect fixed capital requirement?


Share
Notifications

Englishहिंदीमराठी


      Forgot password?
Use app×