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Business Studies · 2024 · 6 marks
CBSE 2024 · Region 3 · Set 3 · Q32
(a) Explain the following factors affecting the working capital requirement of a company: (i) Level of competition (ii) Production cycle (iii) Scale…
(a)
Explain the following factors affecting the working capital
requirement of a company :
(i)
Level of competition
(ii)
Production cycle
(iii)
Scale of operations
OR
(b)
Explain the following factors affecting dividend decision of a
company :
(i)
Taxation policy
(ii)
Access to capital market
(iii)
Contractual constraints
Marking-scheme solution
Level of competition
An organisation facing tough competition need large amount
of working capital to maintain larger inventories.
Competition may also force the firm to extend liberal credit
terms.
Production Cycle
It is the time span between the receipt of raw material and
their conversion into finished goods.
Any organisation having longer processing cycle needs
larger amount of working capital as compared to the
organisations having shorter processing cycles.
Scale of Operations
An organisation operating on a higher scale of operation
requires larger amount of working capital as in this case the
quantum of inventory and debtors is generally high.
Such organisations require large amount of working capital
as compared to the organisations which operate on a lower
scale.
Q. Explain the following factors affecting dividend decision
of a company
(i)
Taxation policy
(ii)
Access to capital market
(iii)
Contractual constraints.
(i)
Taxation policy
If the dividend distribution tax is levied on the companies is
higher it would be better to declare less dividend and vice-
versa.
(ii)
Access to capital market
A company having easy access to capital market is a better
position to declare higher dividend and vice-versa.
(iii)
Contractual constraints
Sometimes restrictions are imposed by the lenders on the
payment of dividend in future and companies have to ensure
that these restrictions are not violated.
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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.