The following data pertains to ABC Ltd. Liabilities Amount (₹) Assets Amount (₹) Equity 45,00,000 Net Fixed Assets 24,60,000 Long Term Debt…

CA Final · Advanced Financial Management · MTP · November 2026
The following data pertains to ABC Ltd. Liabilities Amount (₹) Assets Amount (₹) Equity 45,00,000 Net Fixed Assets 24,60,000 Long Term Debt 13,30,000 Current Assets: Current Liabilities: Cash 3,48,000 Accounts Payable 1,25,000 Bills Receivable 16,98,000 Outstanding Exp. 45,000 Closing Stock 14,94,000 60,00,000 60,00,000 Income Statement for the year ending 31.03.2025 Particulars Amount (₹) Sales 1,35,80,000 Less: COGS 74,70,000 Gross Profit 61,10,000 Less: Indirect Exp. 33,95,000 EBIT 27,15,000 Less: Interest 1,50,000 EBT 25,65,000 Less: Tax @ 42% 10,77,300 EAT 14,87,700 In the next year it is expected that there will be an increase in Sales by 15% and interest amount shall remain unchanged. Based on the above information, answer the following questions.
(A) The company is necessarily underutilising its internal funds.
(B) The company can sustain its growth entirely through internally generated funds.
(C) The company may resort to External Funding Requirements to sustain the higher growth.
(D) The company's growth is necessarily aligned with its internal financing capacity.

Suggested Answer and Working Notes:

Correct Answer: Option (C)

The company may resort to External Funding Requirements to sustain the higher growth.

Topics: Financial Policy & Corporate Strategy

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