From the following, choose the factors affecting working capital requirements :
(A) Growth prospects
(B) Inflation
(C) Diversification
(D) Cash flow position
(E) Level of competition
Choose the correct answer from the options given below :
(
This question was previously asked in
Shift 01/06/2023 8:30 AM - 11:30 AM
A
(A), (D) and (B) only
B
(A), (B) and (C) only
C
(A), (B) and (E) only
D
(A), (C) and (E) only
Correct Answer
(A), (B) and (E) only
Detailed Explanation
- Growth Prospects: If the growth potential of a concern is perceived to be higher, it will require larger amount of working capital so that it is able to meet higher production and sales target whenever required.
- Inflation: With rising prices, larger amounts are required even to maintain a constant volume of production and sales. The working capital requirement of a business thus, become higher with higher rate of inflation.
- Diversification - It is a factor affecting Fixed working capital .
- Cash flow position - It is a factor affecting Financing decision of organizations.
- Level of Competition: Higher level of competitiveness may necessitate larger stocks of finished goods to meet urgent orders from customers.
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