Start networking and exchanging professional insights

Register now or log in to join your professional community.

Follow

For a profitable firm, total sources of funds will always-total uses of funds. Do you agree?

be equal to be greater than be less than have no consistent relationship to

user-image
Question added by خالد ابراهيم , Senior Accountant , Al Khayyat Group /Peugeot and Mazda Automative agent in Jordan
Date Posted: 2013/12/04
Subhranshu Ganguly
by Subhranshu Ganguly , Quality Analyst. , WIPRO

The answer is always greater than.For equal to is the break even point. if cost is greater than revenue it is below the shut down point. Normally the co would have to be shut down. But some times if the mother concern is very strong they can wait for some time in the short  run but in the long run a firm has to earn at least normal profits to justify the investment.

 

Emad Mohammed said abdalla
by Emad Mohammed said abdalla , ERP & IT Software, operation general manager . , AL DOHA Company

The answer will be For a profitable firm, total sources of funds will always          total uses of funds.

 

be equal to

Abdul Wahab
by Abdul Wahab , Credit Controller , Takween Advanced Industries

Equal

Niranjan Singh
by Niranjan Singh , NA , NA (Private Practice)

I agree partialy but not completly because it does not have consistent relationship with each other.

 

Case I(Profitable firm view for1year)

Option2 is correct because to remain as profitable firm total source of fund should be greater than total use of fund. If both are equal then it will be on break-even. That is neither profitable nor loss making firm.

Case II(Profitable firm view for more than1year)

Option4 is correct because when profitable firm has view to make profit in long run then they expand their firm by making investments. Hence, for few quaters or years their total source of fund is less than the total use of fund. With passes of time it becomes equal and then at last total sources of fund exceeds total use of funds.

 

More Questions Like This