Question

Complete the following statement by selecting correct option: Longer the
operating cycle of inventory,
d) Higher would be working capital requirement
a) lesser would be working capital requirement
O b) Higher would be the sales
O c) Lesser would be the sales​

Answer 1

Answer:

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Answer 2

The correct option is d.

Longer the operating cycle of inventory, higher would be working capital requirement.

Working capital is the difference between a company's current assets, like cash, accounts receivable (customers' unpaid bills) ,amount that is due but not yet received , inventories of raw materials and finished goods, and its current liabilities, like accounts payable , all the provisions , unpaid and outstanding expenses.

It is also called as net working capital.

Among all the factors affecting working capital requirement one is the

Length of Operating Cycle:

• It directly depends upon the length of operating cycle.
• Operating cycle refers to the time period involved in product.
• It starts right from accession of raw material and ends till payment is entered after trade.
• However, the working capital demand is more, if operating cycle is long also less working capital is needed whereas for companies having short operating cycle.

The working capital is veritably important for the smooth inflow of operating cycle.

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