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Ramnath is into the Business of Assembling and Selling of Televisions. - Business Studies

Short Note

Ramnath is into the business of assembling and selling of televisions. Recently he has adopted a new policy of purchasing the components on three months credit and selling the complete product in cash. Will it affect the requirement of working capital? Give reason in support of your answer.

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Solution

Working capital is the amount of capital required for meeting the day-to-day operations of the business. In this case, Ramnath is purchasing the components of television on 3 months of credit, and selling the company's product in cash. His working capital requirement is reduced to the extent of credit availed by him.

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APPEARS IN

NCERT Class 12 Business Studies Part 2 - Business Finance and Marketing
Chapter 1 Financial Management
Very Short Answer | Q 5 | Page 254
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