Answer:
Working Capital The capital invested in current assets such as stock of materials and finished goods, accounts receivable, bills receivable and bank balances for meeting day-to-day expenses is known as working capital. Factors affecting the working capital requirements are: (i) Nature of Business A trading organisation and a service industry firm usually needs a smaller amount of working capital as compared to a manufacturing organisation. (ii) Scale of Operations Organisations which operate on a large scale, their quantum of inventory and debtors required is generally high. Such organisations, therefore, require large amount of working capital as compared to the organisations which operate on a lower scale. (iii) Credit Availed Just as a firm allows credit to its customers, it also may get credit from its suppliers. To the extent, it avails the credit on purchase, the working capital requirements is reduced.
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