5 Questions
Explain the difference between fixed capital and working capital requirements in a business.
Fixed capital is the funds needed for the purchase of fixed assets, while working capital is the requirement for day-to-day operations.
What are the factors that lead to an increase in working capital requirement in a business?
Factors that lead to an increase in working capital requirement include peak season, festival season, expansion of business, shifting to a new location, and payment of current debt.
List three examples of long-term sources of finance that can be used to finance fixed capital requirements.
Examples of long-term sources of finance include issue of shares, issue of debentures, and lease financing.
Explain the concept of retained earnings as a source of finance for a business.
Retained earnings refer to the portion of net profit that is retained in the business and used as an internal source of finance.
What are the sources of finance that can be used to meet working capital requirements through short-term finance?
Sources of finance that can be used to meet working capital requirements through short-term finance include trade credit, factoring, public deposits, commercial paper, commercial banks, and financial institutions.
Test your knowledge of business finance with this quiz on the importance of capital, working capital requirements, and long-term sources of finance. See how well you understand the financial aspects of managing a business.
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