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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.
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Answer the following question:
The Return on Investment (ROI) of a company ranges between 10 - 12% for the past three years. To finance its future fixed capital needs, it has the following options for borrowing debt:
Option ‘A’: Rate of interest 9%
Option ‘B’: Rate of interest 13%
Which source of debt, ‘Option A’ or ‘Option B’, is better? Give reasons in support of your answer. Also, state the concept being used in taking the decision.
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:
Nature of business
Explain the following as factors affecting the requirements of working capital:
Scale of operations
What is working capital? Discuss five important determinants of working capital requirement?
Companies with a higher growth potential are likely to
Higher dividend per share is associated with
______ decision involves the decision regarding the distribution of profit or surplus of the company.
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.
