Question :State any three factors that affect the working capital requirements
of a company.
The correct answer is -Three factors that affect the working capital requirements of a company are:
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Nature of business operations: The type of business and its operations can have a significant impact on the working capital requirements. For instance, a manufacturing firm will require a higher amount of working capital as compared to a service-based firm because of the inventory and raw material requirements.
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Sales volume: The level of sales that a company generates also affects its working capital requirements. Higher sales volume results in higher working capital requirements as the company needs to maintain sufficient inventory levels and offer credit to customers.
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Credit policy: The credit policy of the company, such as the credit period offered to customers and the credit terms extended by suppliers, can affect the working capital requirements. A company that offers longer credit periods to its customers may require a higher amount of working capital to meet its cash flow needs. Similarly, a company that has longer credit terms with its suppliers may have a lower working capital requirement.
