Question

Requirement of working capital does not depend upon any factor.

Answer 1

This statement is 'False' because of the following reasons :
(i) Working capital is the excess of current assets over current liabilities.
(ii) It also refers to firm's investment in short term assets : cash, short term securities, account receivable and inventories.
(iii) So, requirement of working capital depends upon nature of business, size of business, volume of sale, production cycle, business cycle etc.
(iv) There are other factors such as credit control, seasonal fluctuations, growth and expansion activities and terms of purchase and sale.
(v) These factors influence the requirement of working capital of the firm, so it differs from firm to firm.