SOURCES OF FINANCE TEST

Jun 21st, 2015
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Q.1. How would you classify financial needs based on time factor? Ans. The financial needs of a business can be classified as under : Q.2. Bring out the various approaches of raising finance (or) How should sources and application of funds be matched by an enterprise ?

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sources of FinanceQ.1. How would you classify financial needs based on time factor? Ans. The financial needs of a business can be classified as under : TypeTime PeriodExamplesLong TermPeriods exceeding five yearsInvestment in Fixed Assets viz. Land, Building, Plant and Machinery, and in Permanent Working Capital Medium TermAbove one year but less than five yearsCosts of intensive advertising campaign or similar deferred revenue expenditure Short TermLess than one yearInvestment in current assets -for working capital requirements. Q.2. Bring out the various approaches of raising finance (or) How should sources and application of funds be matched by an enterprise ? The various approaches to funding are: Name of ApproachMatching ApproachConservative ApproachAggressive Approach Long Term Funds used inFixed Assets and Permanent Working CapitalFixed Assets, Permanent Working Capital and part of Temporary Working CapitalFixed Assets and part of Permanent Working Capital Short Term Funds used inTemporary Working CapitalBalance part of Temporary Working CapitalBalance part of Permanent Working Capital and entire Temporary Working CapitalImpact on LiquidityComparatively well-balancedHigh LiquidityLow Liquidity Impact on ProfitabilityComparatively well-balancedLow profitability and return on assetsHigh return on assets but risky. Q.3. List some sources from which finance can be raised. Long Term SourcesMedium Term SourcesShort Term So

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