The correct answer is D. components and time.
Working capital is a measure of a company’s short-term liquidity. It is calculated by subtracting current liabilities from current assets. Current assets are assets that are expected to be converted into cash within one year, while current liabilities are liabilities that are due within one year.
Working capital can be classified into two components: operating working capital and financial working capital. Operating working capital is the difference between current assets and current liabilities that is used to finance the company’s day-to-day operations. Financial working capital is the difference between current assets and current liabilities that is used to finance the company’s long-term investments.
Working capital can also be classified according to time. Short-term working capital is the difference between current assets and current liabilities that is expected to be converted into cash within one year. Long-term working capital is the difference between current assets and current liabilities that is expected to be converted into cash after one year.
Here is a brief explanation of each option:
- Option A: Financing method and time. This option is incorrect because working capital is not classified according to financing method. Financing method refers to the way in which a company raises funds, such as debt or equity. Working capital is a measure of a company’s liquidity, not its financing method.
- Option B: Rate of return and financing method. This option is incorrect because working capital is not classified according to rate of return. Rate of return refers to the amount of profit that a company makes on its investments. Working capital is a measure of a company’s liquidity, not its rate of return.
- Option C: Time and rate of return. This option is incorrect because working capital is not classified according to time or rate of return. Time refers to the length of time that it takes for a company to convert its assets into cash. Rate of return refers to the amount of profit that a company makes on its investments. Working capital is a measure of a company’s liquidity, not its time or rate of return.
- Option D: Components and time. This option is correct because working capital can be classified into two components: operating working capital and financial working capital. Operating working capital is the difference between current assets and current liabilities that is used to finance the company’s day-to-day operations. Financial working capital is the difference between current assets and current liabilities that is used to finance the company’s long-term investments. Working capital can also be classified according to time. Short-term working capital is the difference between current assets and current liabilities that is expected to be converted into cash within one year. Long-term working capital is the difference between current assets and current liabilities that is expected to be converted into cash after one year.