State any four factors which affect the working capital requirements of a company.
State any four factors which affect the working capital requirements of a company.
Factors which affect the requirements of working capital are:
1. Nature of Business: The basic nature of a business enterprise influences the amount of working capital required by it. For instance, a trading organisation needs a lower amount of working capital as compared to a manufacturing organisation.
2. The scale of Operations: An organisation which is operating on a large scale will require more inventory as its working capital requirement will be more, compared to a small organisation.
3. Business Cycle: When there is a boom in the economy, more production will occur, and so more working capital will be required during that time as compared to the depression phase in the economy.
4. Seasonal Factors: In the peak season, demand for a product will be high and thus high working capital requirements will be more as compared to the lean season.
Factors which affect the requirements of working capital are:
1. Nature of Business: The basic nature of a business enterprise influences the amount of working capital required by it. For instance, a trading organisation needs a lower amount of working capital as compared to a manufacturing organisation.
2. The scale of Operations: An organisation which is operating on a large scale will require more inventory as its working capital requirement will be more, compared to a small organisation.
3. Business Cycle: When there is a boom in the economy, more production will occur, and so more working capital will be required during that time as compared to the depression phase in the economy.
4. Seasonal Factors: In the peak season, demand for a product will be high and thus high working capital requirements will be more as compared to the lean season.
