Question

What is working capital? State the factors affecting requirement of working capital.

Answer 1

Working capital means current assets or circulating capital. Experts define working capital in both, narrow as well as broad sense. In the narrow sense, it is defined as “the difference between current assets and current liabilities”.

Factors affecting....

i. Business Cycle

ii. Requirement of Cash

iii. Growth and Expansion Activities

iv. Seasonal Fluctuations

v. Production Cycle

vi. External Factors

vii. Credit Control

Answer 2

Explanation:

The factors affecting working capital requirement are as follows: i. Business Cycle: When there is boom in the economy, sales will increase, which will lead to an increase in investment in stock.