Q Hitesh started his business with a small sweet shop in Delhi under the name 'Swad' Over the - Business Studies - Important Videos

Question

Q Hitesh started his business with a small sweet shop in Delhi
under the name 'Swad' Over the years his business grew manifold, by
the word of mouth and gradually became a household name in the
sweet segments Recently he procured a big export order Although the
exporter has promised to make some advance payments Hitesh would
still need more funds to meet the increased working capital
requirements

Suggest any two sources through which Hitesh can raise funds to
meet the increased working capital requirements
Give any two merits for each of the suggested source of funds

P. Sujatha · Accepted Answer

Dear Student

1) Hitesh can raise funds to meet increased
working capital requirements through
Period basis funds (long term and short term
funds)
a) Long term sources of funds tend to fulfill
the requirements of business that may exceed even to 5
years
b) Short term funds do not extend over a year
and some of the examples for this type of sources of funds are
trade credit, loans from commercial banks etc

Merits for long term sources of
funds
This type of funds is required for big business
houses for acquiring fixed assets like equipment, development of
the existing plant etc

Merits for short term sources of
funds
Short term funds are required to finance
current assets like accounts receivable and inventories Usually,
manufacturers whose inventories are tied up in inventories or
receivables may require large amount of funds that they may receive
for a short term period