When total source of funds are lesser than total application of funds, the net effect is ___________________.

increase in working capital

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decrease in working capital

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no effect of working capital

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cannot be computed

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Solution

The correct option is C decrease in working capital
Working Capital is the difference between current assets and current liabilities. Decrease in working capital means application of funds are more than the sources.

Therefore
Sources of Funds- Application of Funds= Net Increase in working capital
Rs.200000-Rs.300000
Rs.100000 Net decrease in working capital.

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Similar questions

Funds required for purchasing current assets is an example of

(a) Fixed capital requirement

(b) Ploughing back of profits

(d) Lease financing

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