Question

5. There are various factors affecting the requirement of working capital.​

Answer 1

Answer:

The price levels of inventory and other expenses such as labor rates etc increase the working capital requirement. ... Other factors that determine or impact the working capital in some or the other way are as follows: Cash Requirements. Volume of Sale

Explanation:

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Answer 2

Explanation:

requirement is influenced by various factors. Majority activities of the company affect the working capital requirements of the company. The magnitude of influence may be different. Some important of them are listed below:

Table of Contents

1 Factors Influencing Working Capital Management

1.1 Nature of the Industry / Business

1.2 Seasonality of Industry and Production Policy

1.3 Competition

1.4 Production Cycle Time

1.5 Credit Policy

1.6 Growth and Expansion

1.7 Shortage of supply of Raw Material

1.8 Taxes

1.9 Dividend Policy

1.10 Price Levels

FACTORS INFLUENCING WORKING CAPITAL MANAGEMENT

NATURE OF THE INDUSTRY / BUSINESS

The management of working capital is completely different from industry to industry. A simple comparison of the service industry and manufacturing industry can clarify the point. In the service industry, there is no inventory and therefore, one big component of working capital is already avoided. So, the nature of the industry is a factor in determining the working capital requirement.

SEASONALITY OF INDUSTRY AND PRODUCTION POLICY

Businesses based on seasons like manufacturing of ACs whose demand peaks in summer and dips in winter. The requirement of working capital will be more in summer compared to winter if they are produced in the fashion of their demand. The policy of producing throughout the year can smoothen the fluctuation of the working capital requirement.