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Business Studies · 2024 · 4 marks
CBSE 2024 · Region 1 · Set 2 · Q28
(a) Explain how the following factors affect the working capital requirement of a business: (i) Seasonal factors (ii) Inflation
(a)
Explain how the following factors affect the working capital
requirement of a business :
(i)
Seasonal factors
(ii)
Inflation
OR
(b)
Explain how the following factors affect the choice of capital
structure of a company :
(i)
Floatation costs
(ii)
Stock market conditions
Marking-scheme solution
Factors affecting the working capital requirement of a business
are:
• (i) Seasonal factors:
In peak season, larger amount of working capital is required
• because of higher level of activity.
During lean season, the level of activity as well as the
requirement for working capital is lower.
• (ii) Inflation:
With rising prices, larger amounts are required even to maintain
• a constant volume of production and sales.
Working capital requirement of a business, thus become higher
with higher rate of inflation.
OR
Q(b). Explain how the following factors affect the choice of capital
structure of a company:
(i)
Floatation costs
(ii)
Stock market conditions
Factors affecting the choice of capital structure of a company
are:
• (i) Floatation costs:
Public issue of shares and debentures requires considerable
• expenditure.
Getting a loan from a financial institution may not cost so
much.
• (ii) Stock market conditions:
Use of equity is preferred by companies when the stock markets
are bullish, as equity shares are more easily sold even at a
• higher price.
However, during a bearish phase, a company may opt for debt.
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CBSE Class 12 Business Studies past-paper question from the 2024 board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.