Factors determining working capital

Main factors affecting the working capital are as follows: (1) Nature of Business: The requirement of working capital depends on the nature of business.Whenever the demand for the product is high, prices of the products are also high during the period of prosperity.The quantum of working capital is depending upon a large number of factors.Financial Management Important Questions for CBSE Class 12 Fixed Capital and Working Capital. 1.Fixed Capital The amount of capital investment in fixed assets is.If the number of manufacturing process is large and the time required for each process is short or more, there is a need of more amount of working capital.

Generally, more amount of working capital is required if the size of business concern is large and the scale of operation is also high and vice versa.


This relates to the optimum utilization of resources at a minimum cost.There are a number of factors influencing the working capital requirements of a company.On the other hand, if a company follows cash purchase and credit sales, the need of amount of working capital is high.Determining the Influences of. macro-economic variables and determine the variable that. factors and exogenous factors.

Determinants of Working Capital: (or) Factors Determining Working Capital.Some companies have more earning capacity than others due to better quality of the products, monopoly in market and the like.FACTORS DETERMINING WORKING CAPITAL REQUIREMENT The working capital needs of a firm are determined and influenced by various factors.

What are the factors determining the requirement of fixed


It looks at recent trends and initiatives taken by companies to streamline working.Consider these five common sources of short-term working capital financing.

Factors that Influence a Company's Capital-Structure Decision

It is very difficult to pin point the factor which is highly responsible.Working capital management is the management of the short-term investment and financing of a company.Factors Determining Working Capital Requirement: There is no set of universally.

Some of the factors affecting the working capital of a company are as follows: Factors Affecting the Working Capital: The firm must estimate its working capital very.Essays - largest database of quality sample essays and research papers on Factors Influencing Working Capital.The requirement of working capital will be more in summer compared to winter if they are produced in the fashion of their demand.

Factors effecting estimation of Working capital - SlideShare

Factors Influencing Working Capital Essay - 924 Words

State any four factors which help in determining the working capital requirements of a company.If the price of the products is steady, then, the need of working capital is low.Moreover, the time required in each process may differ from one process to another.If a company has no plan for expansion, less amount of working capital is enough.

Sometimes, the production is carried on in anticipation of demand in future.In this case, the company requires more amount of working capital.In nutshell, trading concern requires more working capital and service organization requires less working capital whereas manufacturing concern requires the working capital between these ends.Size of Business: Size of the firm is also a determining factor in estimating working capital requirements.In the case of trading concern, there is a need of maintaining large inventories, receivables and cash.It is important to remember that different industries have different working capital profiles, reflecting.In those industries where cost of material is a large proportion of the total cost of the goods produced or where costly raw materials are used, large amount of working capital is required.Time is Money: Finding Your Working Capital Sweet Spot Jim Washam, PhD, CTP Arkansas State University Matthew Hill, PhD University of Mississippi.

Working capital requirements, Financial Management

Other factors that determine or impact the working capital in some or the other way are as follows.Obviously, growing industry grows the requirement of working capital also as compared to static industry.

Factors determining working capital requirements - MBA NOTES

If the price of the product is highly fluctuating, the company requires more amount of working capital.

The volume of sales and the size of the working capital are directly related to each other.Seasonality of Industry and Production Policy: Businesses based on seasons like manufacturing of ACs whose demand peaks in summer and dips in winter.Hence, the company is forced to buy the raw materials in bulk and store them for one year.If the credit period is short, there is a need of more amount of working capital and vice versa.The important ones are i) Nature of business: The working capital requirement of a firm is.