The fixed proportion of working capital should be generally financed from the ____ capital sources.
A. fixed
B. variable
C. semi-variable
D. borrowed
Answer: Option D
Solution (By Examveda Team)
The fixed proportion of working capital should be generally financed from the borrowed capital sources. Borrowed capital consists of money that is borrowed and used to make an investment. It differs from equity capital, which is owned by the company and shareholders. Borrowed capital is also referred to as "loan capital."This Question Belongs to Commerce >> Financial Management
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Investment is the _______________.
A. net additions made to the nation’s capital stocks
B. person’s commitment to buy a flat or house
C. employment of funds on assets to earn returns
D. employment of funds on goods and services that are used in production process
Financial Management is mainly concerned with ______________.
A. All aspects of acquiring and utilizing financial resources for firms activities
B. Arrangement of funds
C. Efficient Management of every business
D. Profit maximization
The primary goal of the financial management is ____________.
A. to maximize the return
B. to minimize the risk
C. to maximize the wealth of owners
D. to maximize profit
In his traditional role the finance manager is responsible for ___________.
A. proper utilisation of funds
B. arrangement of financial resources
C. acquiring capital assets of the organization
D. efficient management of capital
correct answer is A. fixed capital sources.
This is based on the financial principle of matching the maturity of assets and liabilities:
Permanent (or Fixed) Working Capital refers to the minimum level of current assets that a firm must maintain at all times to conduct business operations (e.g., minimum inventory, minimum cash). Since this investment is required throughout the year and is permanent in nature, it should be financed from long-term (fixed) sources of capital, such as equity, debentures, or long-term loans.
The working capital means CA-CL i.e. invested by long-term capital. The long-term fund is either the owner's fund or borrowed but it should be fixed. So fixed portion of working capital should be financed by fixed capital.