MANAGEMENT

Detailed explanation-1: -This is known as retained earnings. It is a source of internal financing or self-financing or ‘ploughing back of profits’.

Detailed explanation-2: -Retained earnings are also known as internal financing or self financing or ploughing back of profits i.e. a portion of the net earnings may be retained in the business for use in the future.

Detailed explanation-3: -It must be financed through long-term sources of capital such as equity or preference shares, debentures, long-term loans and retained earnings of the business.

Detailed explanation-4: -Self-financing occurs if the activity is profitable and if a decision is made not to distribute the profits. In accounting terms, self-financing corresponds to the net profit after tax, not distributed, which is found in the liabilities on the balance sheet in terms of reserves and results recorded.

Detailed explanation-5: -In other words, permanent working capital is the least amount of current assets needed to carry out business effortlessly. Thus, it is also known as fixed working capital.