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Explain the Following as Factors Affecting the Requirements of Working Capital: Nature of Business

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प्रश्न

Explain the following as factors affecting the requirements of working capital:

Nature of business

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उत्तर

Working capital refers to current assets which help in day-to-day business operations.

Nature of business: A company which deals in trading or services will require low working capital because it manages a small operating cycle and absence of processing. On the other hand, a company manages a large operating cycle will require high working capital as the conversion of raw materials into the finished product before the end of sale transaction.

Manufacturing organisations ⇒ High working capital

Trading/Service organisations ⇒ Low working capital

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