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      Question

      Which of the following is not a source of funds for a

      company?
      A Business operations Correct Answer Incorrect Answer
      B Borrowings from bank Correct Answer Incorrect Answer
      C Sale proceeds of fixed assets Correct Answer Incorrect Answer
      D Increase in working capital Correct Answer Incorrect Answer
      E All are sources of funds Correct Answer Incorrect Answer

      Solution

      A company’s sources and uses of funds are summarized under the funds flow statement. The sources include: • Funds from Operations (Net Profit after taxes + Depreciation + Other amortisations) • New Issue of Share Capital   • New Issue of Debentures/Bonds   • Additional long-term Borrowing   • Sale Proceeds of Fixed Assets   • Sale of long-term Investments Uses of funds include: • Dividend payment • Redemption of Redeemable Preference Share Capital  • Repayment of Debentures/Bonds  • Repayment of Long-Term Loans  • Purchase of Fixed Assets  • Purchase of Long-Term-Investment  • Increase in Working Capital (means more cash is being tied up in a company's short-term assets or used to pay down short-term liabilities, which represents an outflow of cash from the business)

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