Which working capital financing approach uses short-term funds to finance temporary current assets and long-term funds to finance permanent current assets? MCQ with Answer and Explanation
Which working capital financing approach uses short-term funds to finance temporary current assets and long-term funds to finance permanent current assets?
A. Aggressive Approach
B. Matching (Hedging) Approach
C. Zero Working Capital Approach
D. Conservative Approach
Answer: Option B
Solution (By JKSSB Mock Tests)
The matching approach synchronizes the maturity of the financing source with the life of the asset being financed.
S1: Under the Companies Act 2013, a company can buy back its shares up to 25% of its total paid-up equity capital in a financial year. S2: The debt-equity ratio should not exceed 2:1 after a buyback of shares. Which statement(s) is/are correct?
Explanation:
Section 68 of the Companies Act 2013 limits buyback to 25% of total paid-up equity capital in a year and mandates that the post-buyback debt-to-equity ratio must not exceed 2:1. Both are correct.
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