Question

How is seasonal factor a factor affecting the working capital requirement?​

Answer 1

Answer:

Seasonal factors

Most businesses have some seasonality in their operations in peak seasons because of the higher level of activity a large amount of working capital is required as against. This the level of activity as well as the requirement for working capital will be lowered during the lean season.

Answer 2

Explanation:

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Level of Competition :

If the market is competitive then company will have to adopt liberal credit policy and to supply goods on time. Higher inventories have to be maintained so more working capital is required. A business with less competition or with monopoly position will require less working capital as it can dictate terms according to its own requirements.

Seasonal Factors:

The working capital requirement is constant for the companies which are selling goods throughout the season whereas the companies

 Production Cycle:

Production cycle means the time involved in converting raw material into finished product. The longer this period, the more will be the time for which the capital remains blocked in raw material and semi-manufactured products.Thus, more working capital will be needed.