Question

How much working capital will be required for manufacturing the following products?

(i) Bread

(ii) Furniture on orders

(iii) Automobiles

(iv) Sugar

Answer 1

(i) Bread: It will require less working capital, as it is sold for cash and there is no need to maintain inventory.

(ii) Furniture on orders: No inventory has to be maintained, and also advance can be taken, thus requiring less working capital.

(iii) Automobiles: Huge working capital is required as the production cycle is long and colossal inventory has to be maintained.

(iv) Sugar: Due to the long operating cycle and seasonal nature of the product, a huge stock is maintained. Thus, it requires sizeable working capital.