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FINANCIAL MANAGEMENT — OCM STD 12 Commerce — Question

Gujarat BoardEnglish MediumSTD 12 CommerceOCMFINANCIAL MANAGEMENT3 Marks
Question
Credit policy affects capital requirement. Explain.
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Answer

  • If the business sells its goods on cash, it will require less on hand capital. But, if sold on credit, the business will be cash deficient.
  • In the same way, if the business can acquire raw material on credit and sell the goods on credit or cash, it will affect the capital available with the business.
  • Naturally, the availability of capital with the business will decide its credit requirements and policy.

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