9.

5CAPITALSTRUCTURE
relates to the financing pattern or the proportion of use of different
Capital structure decision
raising funds. There are
mainly two major long-term sources of funds-Shareholders'
sourcesin
and Borrowed funds (Debt).
funds (Equity)
structure refers to the proportion of debt (borrowed funds) and equity (owners' funds)
Capital business. In other words, capital structure refers to the mix
financing the operations of
usedfor owners'funds(equity) and borrowed funds (debts).
between
Debt
calculated as debt-equity ratio, i.e.. Equity or as the proportion of debt in the totàl
It can be
Debt The proportion of debt in the total capital is also called Financial
capital,.e., Debt +Equity
Leverage.
Debt Debt
leverage
Financial Leverage is computed
as
Equity
or
Debt +Eguity 8the financial
use of cheaper debt, but the financial
increases, thecost of funds declines because of increased
risk increases (as discussed previously).
of a business can be seen through EBIT
The impact of financial leverage on the profitability
analysis.(EBIT = Earning Before Interest and Tax, EPS = Earning Per Share)
EPS
of? 30 lakh. Tax rate is 30%. EBIT =
Example 1: Company X Ltd. has total capital employed
74lakh. Three situations are considered.
business).
In situation I,there is no debt (i.e., unlevered
interest.
In situation II, there is debt of 10 lakh at 10% p.a.
interest.
In situation III, there is debt of 20 lakh at 10% p.a.
EBIT-EPS Analysis
Situation li Situation I!
Particulars Situation I
Z4,00,000 74,00.000
EBIT (Earning before Interest 4,00,000
RH06,000 72,00.000
and Tax) (0% of l0'Lakh) (T0% of 20 Lakh
Less: I 0% Interest on Debt NIL
Z3,00,000 7 2,00,000
Earning Before Tax (EBT) 74,00,000 760,000
ZI,20,000 Z90,000
Less: Tax @ 30% (30% of 3,.00,000) (30% of 2,00,000)
(30% of 4,00,000)
1.40.000
2,80,000 2,10,000
Earning After Tax (EAT)
? 2,00,000 L.00,000
73,00,000 (1.00,000+ 10)
No.of Shares of ? 10 (30,00,000 + 10) (20,00,000 + 10)
ZL.05 I.40
0.93
Earning Per Share (EPS) 2,10,000| .40,000
(EPS = EAT + No. of Shares) 2,80,000 2,00,000 .00,000
3,00,000
9.15
Financial Management
 The Company XLtd. earps ?0.93 þer share ifit is unlevered. With debtof? 10
R1.05. With a still higher debt of ? 20 lakh, EPS rises to ? 1.40. Why is the lakhnits
higher debt?- It is because the cost of debt (i.e., rate of interest) is lower than EPS- EPS is
Return on Investment (ROD, which is calculated as: the Tising with
EBIT)
Total Capital Employed
x100
Company's
4,00,000
ROI of company X Ltd. = x100
= 13.33%
30,00,000
This is higher than the 10% interest rate on debt. With higher use of
between ROI and cost of debt, increases the EPS. This is asituation of debt, this
leverage(when ROl is higherthan cost of debt,financial leverage is favourable difference
companies often employ more of cheaper debt to enhance the EPS. favourable). In
This is called Such cases,
financial
Equity. (t refers to the increase in profit earned by the equity
fixed fnancial charges like interest). shareholders due to on
of
Tradi ng
presence
Example 2: Company YLtd. has total capital employed 30 lakh.
EBIT = 2 lakh. Three situations are considered: Tax rate is 30%.
In situation I, there is no debt (i.e., unlevered
business).
In situation II, there is debt of 10 lakh of 10% p.a.
interest.
In situation III, there is debt of 20 lakh at 10% p.a.
interest.
EBIT-EPS Analysis
Particulars Situation I Situation II Situation III
EBIT (Earning Before Interest 2,00,000 72,00,000
and Tax) 2,00,000
? |,00,000 72,00,000
Less: 10% Interest on Debt NIL (I0% of I0Lakh) (|0% of 20 Lakh
Earning Before Tax (EBT) 7 2,00,000 7I,00,000 NIL
Less : Tax @ 30% 760,000 30,000 NIL
(30%% of 2 Lakh) (30% of I Lakh)
Earning After Tax (EAT) ? 1,40,000 70,000 NIL
No. of Shares of 10 73,00,000 2,00,000 Z\00,000
(30,00,000 + 10) (20,00,000 + 10) (1,00,000 + 10)
Earning Per Share (EPS) 70.47 0.35 NIL
(EPS = EAT + No. of Shares)
,40,000 70,000
3,00,000 [2,00,000
In this example, the EPS of the CompanyY Ltd. is
because the Company's ROI is less than cost of debt. falling with increased use of debt. It 1S

ROI of Company YLtd. = 2,00,000

x100 - 6.67%
30,00,000
9.16 Business Studies-12
Whereas the interest rate on debt is 10%. This is a situation of unfavourable financial
leverage (when ROlis less than cost of debt,
VALUABLE TIP
financial leverage is unfavourable). In such Capital structure of a business affects both the
cases, the use of debt reduces the EPS. Trading proftability and the financial risk. ldeally, a company
on equity is clearly unadvisable in such a must choose that risk-return combination which
situation. maximises shareholders' wealth. the debt-equity mix
Even in case of CompanyXLtd., reckless use of that achieves it, is the optimum capital structure. A
capital structure is said to be optimum when the
Trading on Equity is not recommended because proportion of debt and equity is such that it results in an
an increase in debt may enhance the EPS but increase in the price of the equity shares. In other
also increases the financial risk (as discussed words, ll decisions relating to capítal structure should
previously). emphasise on increase in shareholders' wealeh.

EXAM ORIENTED SAMPLE QUESTION

Q. The Return on Investment (ROI) of acompany ranges between 10-12% for the past
three years. To finance its future fixed capital needs, it has the following options for
borrowing debt:
Option A': Rate of interest 9%: Option B': Rate of interest 13%
Which source of debt, Option A' or "Option B', is better? Give reason in support of your
answer. Also state the concept being used in taking the decision. (CBSE 2018 (3)]
Ans. Option ´A' is better.
This isbecause in this option, Return on Investment (10-12%) is higher than the Rate
of Interest (9%).
The concept being used in taking the decision is Trading on Equity. (RTP-9.16)

OBJECTIVE TYPE QUESTIONS 9.4

Multiple Choice Questions:
Choose the correct option to answer the following questions:
(1)
1. Return on investment is computed as
(a) Total Investment x earning before interest and tax
(b) Earning before interest and tax÷ total investment
(c) Earning before tax + total investment
(d) Earning before interest and tax + total investment x 100
(1)
2. Favourable financial leverage leads to
(a) Increase in earning per share (b) Decrease in earning per share
(d) Increase in tax
(c) Earning per share is not affected
3. The total capital of Sparrow Pvt. Ltd. is 60 lakhs. The amount of debt is 20 lakhs.
The company has earned a profit of 15 lakhs during the current financial year. It's
return on investment (RO) for the present year is (1)
(a) 25% (b) 15%
(c) 35% (d) 45%

9.17
Financial Management
 Factors Afferting Capital Strueture Decision
Deciding about the capital structure of afirm involves determining the
various types of funds. This depends upon various factors, explained below: relative proportion of
1. Cash Flow Position: Size of projectedcash flows must be considered before
Cash flows must not only cover fixedcash payment obligations but there must be
buffer also. It must be kept in mind that acompany has cash payment borsurfowiicineg.nt
,obligatmeetionsing
normal business operations; (ii) for investment in fixed Assets; and (ii) for
debt service commitments i.e., payment of interest and repayment of principal the
for (i)
2. Risk Consideration : Use of more debt increases the financial risk
of
Financial isk means that acompany is unable to meet its fixed financial a busin ess.
payment ofinterest, preference dividend andIrepayment of principal. charges,
the financial risk, every business has some operating risk/business amount. Apart from
ie.,
depends upon fixed operating costs e.g, building, rent, salary, risk. Business risk
Higher fixed operating cost results in higher business risk andinsurance
vice-vers.premium, ete.).
The total risk depends upon both financial as well as business risk. If a
risk is low, then its capacity to use debt is higher
whereas firm's business
in case of higher business
firm's capacity to use debt is low. risk
3. Interest Coverage Ratio (1CR): ICR
refers to the number of times Earnings Before
Interest and Taxes of a company covers the Interest obligation. ICR is calculated as: ICR
EBIT
Interest
The higher the ratio, the lower shall be the risk of
company failing to meet its interest
payment obligations. However, this ratio is not an adequate
a company may have high EBIT but measure because sometimes
low cash balance. Apart from with
obligations are also equally important. interest, repayment
4. Debt Service Coverage Ratio
(DSCR): Debt
deficiencies referred to in the Interest CoverageService Coverage Ratio takes care of the
by the operations are compared with the total Ratio (ICR). The cash profit generated
cash required for the service of the debt
and preference share capital.
DSCR is caleulated as:

Profit after tax +Interest + Non -cash

DSCR = expense (eg., Deprecia
Preference dividend+ Interest +Repayment Obligation
Ahigher DSCR indicates better
ability to meet cash commitments. So, the
potential to increase debt rises. companys
5. Cost of Debt : The company can
rate on debt is less. However, inemploy more debt in its capital structure if the interest
case higher cost of debt, company
of
equity. prefers more o
6. Cost of Equity :Cost of equity' means the
assuming risk. When a company increases expected rate of return on equity capital for
debt, the financial risk faced by the equity
9.18
Business Studies-12
 shareholders also increases. Consequently, their desired rate of return may increase.
that
Therefore, a company cannot use debt beyond a certain limit. Ifdebt is used beyond
limit, cost of equity may go up sharply and share price may decrease. Hence, for
maximisation of shareholders' wealth, debt can be used only up to a level.
advertising,
7. Floatation Costs: Cost of raising funds is called Floatation Cost, e.g., costs of company
a
printing prospectus, etc. Floatation costs affect the choice of capital structure of of raising
The cost
as higher the floatation costs, less attractive the source of finance. making a choice.
funds from various sources should be carefully estimated before
Securities with minimum floatation costs should be preferred.
8. Tax Rate :Since interest on debt is a tax
deductible expense, cost of debt is affected by
cheaper and hence, more debt can
the tax rate. A higher tax rate makes debt relatively
be used
30% means the after-tax cost of debt is
For example, borrowing@ 10% and the tax rate
only 7%. Let us understand-How?
@30%.
Suppose, 10% debentures =71,00,000 and tax payable
{40,000
Earning before interest and tax (EBIT)
Less: Interest (10% of 1,00,000) 7 10,000
Earning before tax (EBT) 30,000

Therefore, Tax = 30% of 30,000=9,000

12,000
If there is no debt, Tax = 30% of 40,000 =
9,000 =3,000
Thus, tax savings due to debt = 12,000 -
Interest payable Tax savings = 10,000 - 3,000 = 7,000
So, net interest payable =
which is 7% of 1,00,000.
normally does not cause a dilution of management's control over
9. Control: Issue of debt reduce the management's holding in the
more equity may
the business whereas issue of also. This factor also influences the choice between
company. There is a threat of takeover management is
especially in companies in which the current holding of
debt and equity
on a lower side. to issue
company uses its debt potential to the full, it loses flexibility
Flexibility : If a power for
10.
To maintain flexibility, it must maintain some borrowing
further debt.
unforeseen circumstances.
Framework : Every company operates within a regulatory framework
11. Regulatory
issue of shares and debentures are made as per the
provided by the law, e.g., public 2013 and SEBIguidelines. Similarly, raising
guidelines of the Indian Companies Act,
other financial institutions require fulfillment of various other
funds from banks and
bearing on capital structure decision. Generally, company prefers
norms. This has a easy and less legal and regulatory requirements.
which have
those sources of finance, conditions als0 affect the capital structure
stock market
12. Stock Market Conditions : The phase), equity shares can be easily issued
boom period (Bullish
of a company. During
9.19
Financial Management
 even at higher price. However, during depression or recession period (Bearish
company may find it difficult to raise equity capital and hence it may opt for debt,
13. Capital Structure of other Companies : Debt-equity ratios ofother
Phase), a
same industry act as a guideline for planning the capital structure. This companies in
the
company hould follow the industry norms. However, it should means
not follow the that
norms blindly. For example, if the business risk of acompany is higher,,it cannot
more debt (which raises financial risk) follow industry norms because in such a raise
to industry
overallrisk willbe higher. situation,
14. Return on Investment (RO) : When the ROI of the company is higher than
interest on debt, it can use more debt to increase its Earning Per Share (EPS) (as rate of
previously). discussed
The shareholders of a company are likely to gain with a debt lloan component in at.
capital employed. (Trading on Equity)
How? The use of more debt along with equity increases the EPS of the shareholders
Why? This is because debtloans carry fixed amount of interest, which is a tax dedyetibl
expense.
When? EPS will increase only if the ROI is greater than rate of interest on debt.

EXAM ORIENTEDSAMPLE QUESTION

Q. A business that doesn't grow dies', says Mr. Shah, the owner of Shah Marble Ltd.
with glorious 36 months of its grand success having a capital base of 80 crores.
Within a short span of time, the company could generate cash flow which not only
covered fixed cash payment obligations but also create sufficient buffer. The company
is on the growth path and a new breed of consumers is eager to buy the Italian marble
sold by Shah Marble Ltd. To meet the increasing demand, Mr. Shah decided to expand
his business by acquiring a mine. This required an investment of? 120 crores. To seek
advice in this matter, he called his financial advisor Mr. Seth who advised him about
the judicious mix of equity (40%) and Debt (60%). Mr. Seth also suggested him to take
loan fromna financial institution as the cost of raisingfunds from financial institutions
is low. Though this will inerease the financial risk but will also raise the return to
equity shareholders. He also apprised him that issue of debt will not dilute the control
of equity shareholders. At the same time, the interest on loan is a tax deductible
expense for computation of tax liability.
After due deliberations with Mr. Seth, Mr. Shah decided to raise funds from a financial
institution.
(i) Identify and explain the concept of Financial Management as advised by Mr.
Seth in the above situation.
(i) State the four factors affecting the concept as identified in part 'a' above which
have been discussed between Mr. Shah and Mr. Seth. (CBSE 2017 (5))
|Ans. (i) Capital structure. (RTP-9.15)

9.20 Business Studies-12

 (ii) The factors affecting capital structure are: (any four) (RTP-9.18)
(a) Cash flow position.
(b) Floatation cost.
(c) Risk consideration.
(d) Tax rate.
(e) Control.

D5
OBJECTIVETYRE QUESTIONS
Multiple Choice Questions:
Choose the correct option to answer the following questions:
1. Inwhich of the following situations a company should not issue debt capital? (1)
(a) When the return on investment is high
(b) When the interest coverage ratio is high
(c) When the rate of tax is low
(d) When the cash flow position of the company is strong
(1)
2. To retain control over the firm, a firm should
(a) Issue equity shares (b) Issue debt
(c) Invest (d) Save
Fill in the Blanks with appropriate words:
3. Capital structure includes proportion of and equity. (1)
in
4. With an increase in debt component in capital structure it leads to increase
(Financial risk/Business risk)

9.6 FIXED CAPITAL

Fired capital refers to investment in long-term assets or fired assets.
year, usually for much
Fixed assets are those which remain in the business for more than one
building, vehicles, etc.
longer, e.g., plant and machinery, furniture and fixture, land and
Factors Affecting Fixed Capital Requirements
the following factors:
The Fixed Capital Requirements of a business enterprise depends upon
the Fixed Capital
1. Nature of Business : The nature of business has a great impact on
needs heavy
Requirements of a company. For example, a manufacturing organisation
On the other hand,
investment in fixed assets like land, building, plant, machinery, etc.
since it does not require to
a trading firm requires lower investment in fixed assets
purchase plant and machinery, etec.
scale needs bigger
2. Scale of Operations : A larger organisation operating at a higher in fixed assets as
investment
plant, more space, etc. and, therefore, requires higher
compared to a small scale organisation.
9.21
Financial Management
 3. Choice of Technique : Acapital-intensive organisation
requires
plant and machinery as it relies less on manual labour. Hence, higher
capital for a capital-intensive organisation would be higher. On the investmofentfixedin
requirement
labour-intensive organisation requireless investment in fixed assets. Hence,other hand,
capitalrequirement is lower. their fixed
4. Technology Upgradation/Modernisation : In certain
industries,
obsolete very soon. Consequently, their replacements also become due assets become
higher investment in fixed capital assets is required in such cases. For faster.
become obsolete faster and are replaced much s0oner than say, example, Therefore,
computers
organisations which use assets which are prone to obsolescencefurniture. Thus, such
capital to purchase such assets. require higher fixed
5. Growth Prospects: Higher growth prospects
tocreate higher production capacity in order require higher investment in fixed assets
to meet the anticipated higher demand
quicker. So, the fixed capital requirement is higher.
6. Diversification :
Diversification means running business in more products than only
one product. If a company chooses to diversify its
amount of fixed capital. For example, if a brick operations, then it requires higher
business of cement manufacturing, then it will needmanufacturing company starts the
additional fixed capital to invest in
land and building, plant and machinery, etc.
7. Financing Alternatives:When an asset is
taken on lease, the firm pays lease rentals
and uses it. So, fixed capital requirements is low since it
avoids huge sums required to
purchase the asset. Thus, availability of leasing facilities may reduce the funds required
toinvest in fixed assets, thereby reducing the fixed capital
is specially suitable in high risk lines of business. requirements. Such a strategy
8. Level of Collaboration : Certain
business firms share each other's facilities, e.g., a
bank may use another's ATM. Such collaboration or joint venture reduces the level of
investment in fixed assets for each firm. So, the need of fixed capital is lower.

EXAM ORIENTED SAMPLEQUESTION

Q. Pinnacle Ltd. deals in the sale of stationery and
office furniture. They source the
finished products from reputed brands who give them four to six months credit. Seeing
the demand for electronic items, they are also planning to market these items by
opening outlets throughout India. For this, they have decided to join hands with a
Japanese electronic goods manufacturer.
Identify and state any two factors that would affect fixed capital requirement of Pinnacle
Ltd. as discussed above. [CBSE 2017 (3))
Ans. Two factors that would affect fixed capital requirement of
Pinnacle Ltd. are:
(RTP-9.22)
(i) Growth prospects.
(ii) Level of collaboration.
9.22 Business Studies-|2
OBJECTIVE TYPE QUESTIONS 9.8
Multiple Choice Questions:
Choose the correct option to answer the following questions:
fixed capital? (1)
1. Which of the following statements is not true with regard touse of
(a) The business risk involved is low
(b) The investment decisions are irreversible
(c) It effects the long term growth of the business
(d) Large amount of funds are involved
2. Under which of the following circumstances the fixed capital requirement of(1)a
business is not likely to be high?
(a) The growth prospects of a company is high
(b) When the financial alternatives are easily available
(c) When the raw material is not easily available
(d) Capital intensive techniques of production are used
State whether the following statements are "True' or False':
3. If there is availability of leasing facilities, more fixed capital would be required. (1)
lesser than that of a
4. The requirements of a fixed capital for a trading concern are
manufacturing organisation. (1)

9.7 WORKING CAPITAL

assets (or
Working capital means the portion of capital investment in short-term
operations of the
current assets) of a firm. This investment facilitates smooth day-to-day
business.
within a period of
Current assets are expected to get converted into cash or cash equivalents
cash in hand/Cash at
one year. Examples of current assets (in order of their liquidity) are
bank, marketable securities, bills receivable, debtors, finished goods inventory, work-in-progress,
raw materials and prepaid expenses.

VALUABLE TIP
Working capital decisions affect the liquidity as well as profitability of abusiness.
profitable than fxed
Working capital refers to investment in current assets. Current assets are more liquid but less
cash quicker and
assets. These provide liquidity to the business. As asset is more liquid if it can be converted into
without reduction in value.
payment
Insufficient investment in current assets may make it more difficult for an organisation to meet its
obligations. However, these assets provide little or low return.
Hence, obalance needs to be struck between liquidity and profitability.
Current liabilities are those payment obligations which are due for payment within one year;
such as bills payable, creditors, outstanding expenses and advances received from customers,
etc.

Financial Management 9.23

 VALUABLE TIP
Curent assets are financed partlyfrom short-term sources and partly from!nlong-term sources.
sources, i.e.
Some part of current assets is financed through short-term current liabilities. The rest
through long-term sources and is called 'Net Working Capital', ie. Current Assets-Current Liabilities is financed
Net Woring Capital may be defined as the excess of current assets over current liabilities.
Explanation: Suppose capital employed of acompany is I00 crore, which consists of debt 25 crore:
75 crore. The company invested 85 crore in fixed assets (j.e. fixedcapital is 85 crore). lt means the and equity
invest 15 crore in current assets.
Suppose company's current assets aree50 crore. This is because current assets of 35 crore are
company can
current liabilities (.e. short-term sources). The remaining 15 crore (i.e.50 crore - 35 crore or financed
currentthrough
-cUrrent liabilities or workingcapital) is financed through long-term sources. assets
Factors Affecting the Working Capital Requirements
The working Capital Requirements of an enterprise depends upon the following factors .
1. Nature of Business:A trading business needs lessamount of working capital
there is no processing. Therefore, there is no distinction between raw becauseand
materials
finished goods. Sales can be affected immediately upon the receipt of materials,
even before that. However, working capital requirements of a sometirme
more since raw materials needs to be converted into manufacturing businpse is
finished goods before any sales can
become possible.
Similarly, service industries like transport, banking, advertising, warehousing, etc. reaquire
less working capital since they usually do not have to maintain inventory.
2. Scale of Operations : There is a direct relation between the
scale of operations. Large companies need more working capital working capital and the
as their inventory level.
debtors etc. are generally high. However, companies operating at small scale
less working capital due to low level of activity. requires
3. Business Cycle : Working capital requirement is also affected by different phases of
business cycle. During boom period, i.e., when the business is
capital is required due to increase in demand and sales. However, prosperous, more working
or recession, the demand declines and it affects
in a period of depression
In such a situation, less working capital is
both-the production and sales-of goods.
required.
4. Seasonal Factors: Companies which produceand sell seasonal goods need
of working capital during peak season. For large amount
example, a
moreworking capital during winters as compared to wollen garmentscompany needs
summers. On the other hand, less
working capital will be required during the lean season.
5. Production Cycle : Production cycle means the time span between the receipt of
raw materials and their conversion into finished
goods.
longer production cycle will require greater amount of working Business firms having
locked up in the production process for a longer period of time. Oncapital as their funds get
units with shorter (faster) production cycle need less working the other hand, business
time taken in case of locomotive capital. For example,
manufacturing more and more working capital s
is
required than in bakery where the time required to manufacture is short.
9.24 Business Studies-I2
 6. Credit Allowed : Credit policy refers to average time period for collection of sales
proceeds. It depends upon number of factors like level of competition in the market,
creditworthiness of clients, ete. A company which grants liberal credit to its customers
needs more working capital due to more debtors. However, in case of strict credit policy,
less amount of working capital is required.
7. Credit Availed:Terms of purchase also influence the needs for working capital. If a
firm purchases raw materials and other services on credit basis and selling goods on
cash basis, then it will need less working capital. However, if a firnm buys raw materials
on cash basis but sells the finished goods on credit basis, then it will require greater
working capital.
8. inventory
Operatingturnover
Efficieney : Eficiency in managing raw materials (reflected in higher
ratio), reducing the amount tied up in debtors and receivables (i.e.,
higher receivables turnover ratio) and better sales efforts by the management may reduce
the level of raw materials, debtors and finished goods respectively, resulting in lower
requirement of working capital.
9. Availability of Raw Material : If raw material and other supplies can be procured
easily and continuously, then the firm will require to maintain lower stock levels. So,
working capital requirements will be low. However, in case of non-availability or seasonal
availability of raw materials, working capital requirements will be high since higher
stock levels may be required.
In addition, the time lag between placement of order and actual receipt of the materials
(called lead time) is also relevant. Higher the lead time, higher the quantity of material
to be stored and higher is amount of working capital requirement.
10. Growth Prospects : The firm with higher growth prospects needs higher amount of
working capital so that it is able to meet higher production and sales targets whenever
required.
11. Level of Competition:Ifthe market is highly competitive, a firm may haveto maintain
higher stocks of finished goods than its competitors to meet urgent orders from customers
has
so that orders do not go into the hands of competitors. Moreover, more credit period
capital
to be allowed on goods sold, resulting in higher level of debtors. So, more working
is required. However, in case of less competition or monopoly position, a firm willrequire
less working capital.
to maintain
12. Inflation/Rising Prices: With rising prices, larger amounts are required in the working
a constant volume of production and sales. It will result in an increase
5%, does not
capital requirements. However, it must be noted that an inflation rate of
The
mean that every component of working capital will change by the same percentage.
actual requirement shall depend upon the rates of price change of different components
as their
(e.g., raw material, finished goods, labour cost, ete.), finished goods as well
proportion in the total working capital requirement.

Financial Management 9.25