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Question
A company which has a better operating efficiency requires ______ working capital.
A company which has a better operating efficiency requires ______ working capital.
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Solution
The correct option is A less
Operating efficiency means efficiently completing the various business operations. Operating efficiency of every organisation happens to be different.
Some such examples are: (i) converting raw material into finished goods at the earliest, (ii) selling the finished goods quickly, and (iii) quickly getting payments from the debtors. A company which has a better operating efficiency has to invest less in stock and the debtors.
Therefore, it requires less working capital, while the case is different in respect of companies with less operating efficiency.
Operating efficiency means efficiently completing the various business operations. Operating efficiency of every organisation happens to be different.
Some such examples are: (i) converting raw material into finished goods at the earliest, (ii) selling the finished goods quickly, and (iii) quickly getting payments from the debtors. A company which has a better operating efficiency has to invest less in stock and the debtors.
Therefore, it requires less working capital, while the case is different in respect of companies with less operating efficiency.
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