Matching principle of working capital financing
What is the matching principle of working capital financing and also explain the benefits of following this principle.
Expert
The matching principle is when short-term financing is used for temporary current assets while long-term financing is used for permanent current assets and fixed assets. The main benefit of this approach is that as temporary current assets are sold off the proceeds can be used to pay off the short-term debt.
Rs. Sales 2,40,000 Variable costs 1,44,000 Fixed costs 26,000 Profit before tax 70,000 Rate of tax 40% Firm is proposing to buy the new plant that could generate extra annual profit of Rs. 10,000. The fixed cost of new plant is expected to Rs. 4000. New plant would increase sales volume by Rs. 40,00
Swann Systems containing forecast such income statement to upcoming year: Sales &
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