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Question
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?
Options
Fixed capital
Special working capital
Circulating capital
Gross working capital
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Solution
Fixed capital
Explanation:
Fixed capital refers to the finances required to acquire fixed assets that will be used continuously for business activities.
RELATED QUESTIONS
Explain the following as factors affecting the requirements of working capital:
Nature of business
Answer the question.
Briefly explain any four types of working capital required by a business concern.
Higher working capital usually results in :
Current assets are those assets which get converted into cash
A fixed asset should be financed through
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.
What are decisions about investment in long-term assets called?
Through which sources must fixed capital be financed?
Which list contains long-term sources for financing fixed capital?
