Question

Hemant, a businessman, is engaged in the purchase and sale of bread. Identify his working capital requirements by giving reasons to support your answer. Now, he is keen to start his own bread factory. Explain any two factors that will affect his fixed capital requirements.​

Answer 1

Answer:

working capital requirement :->

1. nature of business :-> the first factor affects the requirement of working capital is nature of business, If the business is of trading nature hence the requirement of working capital is higher.

2. credit allowed :-> if the business follows liberal credit policy then the requirement of working capital is higher and vice versa.

FIXED CAPITAL REQUIREMENT :->

1. nature of business :-> the manufacturing nature of business leads to higher requirement of fixed capital. "hemant starts his own factory"

2. technique of production :-> if the capital intensive method used then it requires more fixed capital and vice versa.