Question

Rate of return on capital is exceptionally high in (a) Under – capitalization (b) Over – capitalization (c) Working capital (d) Fixed capital

Answer 1

Answer:

option A is correct

Rate of return on capital is exceptionally high in Under - capitalization

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Answer 2

Rate of return on capital is exceptionally high in Under – capitalization

1. rate of return (ROR) is the total gain or loss availed from an investment in a particular time.
2. this is expressed in percentage with relation to the initial investment amount.
3. under capitalization is a state of an organization where it cannot conduct business operations or pay to the creditors because the cash flow of the company is insufficient.
4. this means the company do not have enough capitals
5. at this point of time , the company is not able to access form of financing.