Question

‘Isha Sweets’ was set by Isha Sharma to prepare and sell organic, vegan and healthy sweets alternatives like hazelnuts date ladoos, dry fruit date burfi, stuffed mejdool date etc. For the last many years, the demand for her products was very high as people these days prefer to buy healthier alternatives for consumption as well as gifting purposes. But this year suddenly, the cost of dates, dry fruits and other ingredients used for preparing these healthy sweets had increased. With rising prices of raw materials, larger amounts of funds were required to maintain a constant volume of production and sales. As a result, the working capital requirement of ‘Isha Sweets’ became higher.

The factor which led to an increase in the working capital requirements of ‘Isha Sweets’ was:

Options

• Availability of raw material

• Inflation

• Scale of business 

• Production cycle

Answer 1

Inflation

Explanation:

Rising raw material prices resulted in an increase in working capital requirements for “Isha Sweets”, indicating a direct impact of inflation.