: Factors Determing the Working Capital Requirements (1)
Document Summary
The following are important factors which influence working capital requirements: nature or character of business: the working capital requirements of firm depend upon nature of its business. Manufacturing undertaking require sizeable working capital between these two: size of business/scale of operations: greater the size of a business unit, larger will be requirement of working capital and vice-versa. Production policy: requirements of working capital depend upon production policy. If the policy is to keep production steady by accumulating inventories it will require higher working capital. The longer the manufacturing time, the raw materials and other supplies have to be carried for longer period in the process with progressive increment of labour and service costs before finished product is finally obtained. Therefore, if there are alternative processes of production, the process with the shortest production period should be chosen. 5. credit policy: a concern that purchases its requirements on credit and sell its products/services on cash requires lesser amount of working capital.
