Permanent working capital is generally financed through

The correct answer is: C. Internal financing

Permanent working capital is the portion of working capital that is needed to finance the firm’s normal operations on a day-to-day basis. It is typically financed through internal sources, such as retained earnings and cash flow from operations.

Long-term capital funds are used to finance long-term assets, such as plant and equipment. Government assistance is not a common source of financing for working capital. Short-term loans from banks are typically used to finance temporary working capital needs, such as seasonal fluctuations in sales.

Here is a more detailed explanation of each option:

• A. Long-term capital funds are used to finance long-term assets, such as plant and equipment. These funds can come from a variety of sources, including debt, equity, and hybrid securities. Debt financing involves borrowing money from a lender, such as a bank or a bondholder. Equity financing involves selling shares of ownership in the company to investors. Hybrid securities combine features of debt and equity financing.
• B. Government assistance is not a common source of financing for working capital. However, there are some government programs that can provide financial assistance to businesses, such as the Small Business Administration (SBA). The SBA offers a variety of loan programs, as well as grants and other forms of assistance.
• C. Internal financing is the most common source of financing for permanent working capital. This includes retained earnings, which are the profits that a company keeps after paying taxes and dividends, and cash flow from operations, which is the cash that a company generates from its day-to-day business activities.
• D. Short-term loans from banks are typically used to finance temporary working capital needs, such as seasonal fluctuations in sales. These loans are usually repaid within a year.

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