Select the appropriate drawback of excessive working capital.

Let’s begin by defining the **key term:**

**Working Capital**

This term refers to the computed difference that shows the distinction between the current assets and
liabilities.

To answer the question, here are some disadvantages of a company with too much working capital:

- Rate of return will be reduced since too much capital doesn’t bring profit to the business.

- Excessive working capital will provide a low return on investment, which will affect the company’s
value of shares.

- Businesses may tend to increase their purchase of inventories but this may lead to wastage, losses,
mishandling, or even theft.

- Too much working capital establishes a bigger idle fund

- Having too much working capital lures executives from spending more than regular.

Which of the following is not true for a trade discount?

Let’s begin by defining the **key term:**

**Trade Discount**

This term refers to a seller's discount offered to the client to lower the acquired item's price.

To answer the question, listed are the things that describe a trade discount:

- It is the value taken from the list price.

- Rather than being deducted from the amount paid by the customer, discounts like such are given to
resellers, wholesalers, or retailers by the manufacturer.

- From an accounting point of view, trade discounts do not have journal entries.

- The goal of discounts like this is to promote more sales due to low price offer

As can be seen, here are some characteristics that are true about trade discounts. Any option or
description that is opposed to this will be used to answer the question directly.

Ratio analysis is a tool to measure the?

**Company’s financial well-being.**

Ratio analysis is used to compare the financial statement of the company to unveil line-item details that
describe its liquidity, profitability, solvency, and operational efficiency to a company, sector, or industry
in the same business field. Moreover, the ratio analysis is also used to understand certain risks that a
business has, thus, its well-being in financial aspects.

Which is not an internal factor affecting working capital?

Let’s begin by defining the **key term:**

**Working capital**

This term refers to the funds accessible to pay your immediate financial responsibilities.

To answer the question, here are some internal factors that affect the working capital:

- Business’ nature - this factor influences decisions regarding working capital

- Business size - this factor influences whether a large sum of money is needed to be invested in the
working capital.

- Business’ product policy - similar to business size, this factor influences whether a large sum of money
is needed to be invested in the working capital.

- Business’ credit policy - this factor influences the working capital’s credit policy.

- Business growth and expansion capabilities - this factor influences how the business utilize, operates,
and release fund for working capital optimization.

As can be seen, these are some internal factors that are true about working capital. Any option or
description that is opposed to this will be used to answer the question directly.

What does the amount of working capital say with an increase in current assets?

Let’s begin by defining the **key term:**

**Working capital**

This term refers to the funds accessible to pay your immediate financial responsibilities.

To answer the question, when a company has more current assets compared to its current liabilities, a
more positive working capital ensues because the business will be capable of covering its debts within
the next 12 months. Moreover, a positive working capital ensures that a company has convincing
financial strength.

Discuss the determinants of the working capital of a firm.

Let’s begin by defining the **key term:**

**Working capital**

This term refers to the funds accessible to pay your immediate financial responsibilities.

To answer the problem, the list shows the following determinants present in a firm’s working capital:

- Business nature and size - working capital requirement is dependent upon the structure of the business

- Firm’s business cycle situation - working capital requirement is directly dependent upon whether the
company is under the cycles with greater volumes of production or periods with an idle or common
production volume.

- Market conditions - greater competition requires larger inventory to ensure more profit; thus, a large
sum of working capital is needed.

- Credit Policy - working capital requirement is dependent upon the business’ credit policy

- Tax provisions and rates - working capital requirement is dependent upon tax requirements.

As can be seen, the following list is some of the working capital’s determinants. Any items with a
corresponding influence that directly impacts the amount that should be invested in the company’s
current assets and liabilities may also be included to answer the problem.

Which of the following statement are false about ratio analysis?

Let’s begin by defining the **key term:**

**Ratio analysis**

This term refers to a quantitative tool that measures and analyzes a company’s financial position and
trends.

To answer the question, the following list shows the characteristics of ratio analysis:

- Ratio analysis is used to compare the financial statement of the company

- Its purpose is to unveil the company’s line-item details that describe its liquidity, profitability, solvency,
and operational efficiency to a company, sector, or industry in the same business field.

- Ratio analysis is also used to understand certain risks that a business has, thus, its well-being in
financial aspects.

- It is most helpful in terms of communicating and coordinating the company’s financial leverage
compared to other businesses

- Ratio analysis is better used to provide a more in-depth financial forecast and financial planning
As can be seen, these are some descriptions that are true about ratio analysis. Any option or account
that is opposed to this will be used to answer the question directly.

What are the aspects of working capital management?

Let’s begin by defining the **key term:**

**Working capital**

This term refers to the funds accessible to pay your immediate financial responsibilities.

**Working capital management**

This term refers to a strategy made for businesses to guarantee the efficient operations of the said
company through meticulous monitoring and analysis.

To answer the question, **all facets of a company’s current assets and liabilities are involved in working
capital management. **

Therefore, any types of management methods relating to such will be included as well. For instance,
cash management, inventory management, receivable management, and/or accounts payable
management are all involved in the said terminology.

From the following what are the uses of ratio analysis?

Let’s begin by defining the **key term:**

**Ratio analysis**

This term refers to a quantitative tool that measures and analyzes a company’s financial position and
trends.

To answer the question, the following list shows the characteristics of ratio analysis:

- Ratio analysis is used to compare the financial statement of the company

- Its purpose is to unveil the company’s line-item details that describe its **liquidity, profitability,
solvency, and operational efficiency** to a company, sector, or industry in the same business field.

- Ratio analysis is also used to understand certain risks that a business has, thus, its well-being in
financial aspects.

- It is most helpful in terms of communicating and coordinating the company’s financial leverage
compared to other businesses

- Ratio analysis is better used to provide a more in-depth financial forecast and financial planning
As can be seen, the following list is some of the ratio analysis’ main use. Any items with the same idea
may also be included to answer the problem.

What do you mean by working capital management?

Let’s begin by defining the **key term:**

**Working capital**

This term refers to the funds accessible to pay your immediate financial responsibilities.

To answer the problem, working capital management is a term that refers to a **strategy made for
businesses to guarantee the efficient operations of the said company through meticulous monitoring
and analysis.**

The technique is utilized to optimize the best use for the company’s current assets and liabilities in order
to maintain good cash flow and meet short-term requirements.

Discount allowed appearing in the trial balance are shown?

Let’s begin by defining the **key term:**

**Discount allowed**

This term refers to a loss or an expense from the company as it settles the debtors’ accounts at a
discounted amount.

**Trial Balance**

This term refers to a worksheet that states all the debit and credit accounts made by a company to
record all its transactions.

Based on the definitions, the discount allowed is accounted for on the profit and loss account under the
debit side of the statement. Since the discount allowed is supposed to be an income that was sacrificed
by the company, it becomes a reduction in the revenue which is why it is shown as an expense.

Working capital forecasting is based on the overall?

Let’s begin by defining the **key term:**

**Working capital**

This term refers to the funds accessible to pay your immediate financial responsibilities.

To answer the question, the basis of working capital forecasting is the company’s **financial policies
and requirements.** Since the main intent of forecasting is to determine the firm’s financial position in
order to gain control over its liquidity, and capability of meeting the company’s necessities.
Select the appropriate benefit of adequate working capital.

Let’s begin by defining the **key term:**

**Working capital**

This term refers to the funds accessible to pay your immediate financial responsibilities.

To answer the question the following list shows the advantages of having adequate working capital:

- The business will be able to meet its daily operational requirements and commitments under normal
circumstances

- The business will be able to provide for a regular wage or salary payments

- The business will be able to maintain its employee morale

- The business will increase its efficiency, and productivity, and will reduce costs due to employee
satisfaction

- The business will maintain normal spending and thus will reduce wastage

As can be seen, these are some benefits of having adequate working capital. Any items with the same
idea may also be included to answer the problem.