{"id":51843,"date":"2024-04-15T23:30:40","date_gmt":"2024-04-15T23:30:40","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=51843"},"modified":"2024-04-15T23:30:40","modified_gmt":"2024-04-15T23:30:40","slug":"the-fixed-proportion-of-working-capital-should-be-generally-financed-from-the-____-capital-sources","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/the-fixed-proportion-of-working-capital-should-be-generally-financed-from-the-____-capital-sources\/","title":{"rendered":"The fixed proportion of working capital should be generally financed from the ____ capital sources."},"content":{"rendered":"<p>[amp_mcq option1=&#8221;fixed&#8221; option2=&#8221;variable&#8221; option3=&#8221;semi-variable&#8221; option4=&#8221;borrowed&#8221; correct=&#8221;option4&#8243;]<!--more--><\/p>\n<p>The correct answer is: <strong>D. borrowed<\/strong><\/p>\n<p>Working capital is the difference between current assets and current liabilities. It is used to finance the day-to-day operations of a business. The fixed proportion of working capital is the amount of working capital that is required to maintain the business&#8217;s operations on a day-to-day basis. This amount is typically financed from borrowed capital, such as loans or lines of credit.<\/p>\n<p>The other options are incorrect because:<\/p>\n<ul>\n<li>Fixed capital is used to finance the acquisition of fixed assets, such as land, buildings, and equipment.<\/li>\n<li>Variable capital is used to finance the production of goods or services.<\/li>\n<li>Semi-variable capital is a combination of fixed and variable capital.<\/li>\n<\/ul>\n<p>Borrowed capital is the most common source of financing for the fixed proportion of working capital because it is a flexible source of funding that can be used to meet the changing needs of the business. Borrowed capital can be obtained from a variety of sources, such as banks, credit unions, and other financial institutions.<\/p>\n<p>There are a number of advantages to using borrowed capital to finance the fixed proportion of working capital. These advantages include:<\/p>\n<ul>\n<li>Flexibility: Borrowed capital can be used to meet the changing needs of the business.<\/li>\n<li>Cost-effectiveness: Borrowed capital can be a cost-effective way to finance working capital, especially if the interest rate is low.<\/li>\n<li>Tax benefits: Interest payments on borrowed capital may be tax-deductible.<\/li>\n<\/ul>\n<p>However, there are also some disadvantages to using borrowed capital to finance the fixed proportion of working capital. These disadvantages include:<\/p>\n<ul>\n<li>Risk: Borrowed capital is a source of debt, which means that the business is obligated to repay the loan, plus interest, on a specified schedule. If the business is unable to repay the loan, it may be forced to declare bankruptcy.<\/li>\n<li>Cost: Borrowed capital can be a costly source of funding, especially if the interest rate is high.<\/li>\n<li>Dilution of ownership: When a business borrows money, it is essentially taking on debt. This can lead to a dilution of ownership, as the lenders will have a claim on the assets of the business.<\/li>\n<\/ul>\n<p>Overall, borrowed capital is a common and effective source of financing for the fixed proportion of working capital. However, it is important to weigh the advantages and disadvantages of using borrowed capital before making a decision.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>[amp_mcq option1=&#8221;fixed&#8221; option2=&#8221;variable&#8221; option3=&#8221;semi-variable&#8221; option4=&#8221;borrowed&#8221; correct=&#8221;option4&#8243;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"class_list":["post-51843","post","type-post","status-publish","format-standard","hentry","category-financial-management","no-featured-image-padding"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The fixed proportion of working capital should be generally financed from the ____ capital sources.<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/the-fixed-proportion-of-working-capital-should-be-generally-financed-from-the-____-capital-sources\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The fixed proportion of working capital should be generally financed from the ____ capital sources.\" \/>\n<meta property=\"og:description\" content=\"[amp_mcq option1=&#8221;fixed&#8221; 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