Discuss factors affecting working capital in an organization
Answers
Working capital.÷
Working capital refers to the capital which is needed by the enterprise to run its day to day activities .In other words, Working capital is the investment of finance in current assets of the firm .It is divided into two parts.
(1) Gross working capital
(2) Net working capital.
Gross working capital is the investment of finance in current assets of the firm.
Net working capital is the excess of current assets over current liabilities.
i.e
.
Current assets - Current liabilities.
Factors affecting the working capital÷
(1) Size of firm ÷ If the size of firm is large then there is need of more working capital. while in case the size of firm is small then there is need of less working capital.
(2) Nature of firm ÷ If the business is of manufacturing, then there is large need of working capital. while if firm if of trading nature then there is need of less working capital.
(3) Business cycle ÷ If the firm is suffer from boom period then firm need less finance . while if firm is in depression period then firm needs more. working capital.
(4)Scale of firm ÷ If the firm scale is large it means firm needs more working capital. while if firm scale is small then firm needs less working capital.
(5) Seasonal changes ÷ If firm is in peak season. then it means that firm is need of less working capital. while if firm is in lean season then firm needs more working capital .
_______________________
Thanks ☺️