Working capital requirements of an enterprise depend on a variety of factors. These factors affect different Enterprises differently and vary from time to time. These factors are shown below:
Nature of business
the working capital need sir basically influential by nature of the business the proportion of current assets total assets measures the relative requirements working capital of various industries
Size of the business
the size of the business also affect the working capital needs size may be measured in terms of the scale of operations larger the scale of operations Raja will be the form working capital requirements small of the scale of operations smaller will be the forms working capital requirements
Manufacturing cycle
manufacturing cycle also affects the working capital news needs manufacturing cycle refers to the time gap between the purchase of raw materials and the production finished goods lost at the manufacturing cycle larger will be the forms working capital requirements shutter the manufacturing cycle smaller will be the forms working capital requirements for example distillery which has long manufacturing cycle due to aging process required heavy investment in inventory where has hey Bakery having certain manufacturing cycle requires low investment in inventories
Business cycle
the working capital requirements depend upon the demand and sale of goods the demand and sale of goods usually increase when the economy is going through a boom place and decrease and the economy is is going through aliens space the effect of business cycle fixation on working capital has been shown below to avoid the the production problems arising due to seasonal fluctuations the form a follower policy of study production in all seasons that lies its resources to the full extent which means English of inventories in oxygen and their disposal in peak season since Srinu situations generally confirmed study pattern financial arrangements for seasonal working capital requirements should be made in advance
Production policy the production policy of the form affects the working capital by influencing the level of inventories FM form NGS engaged in a manufacturing of products the demand of fits of which is seasonal may follow any of the following 3 production process
Nature of business
the working capital need sir basically influential by nature of the business the proportion of current assets total assets measures the relative requirements working capital of various industries
Size of the business
the size of the business also affect the working capital needs size may be measured in terms of the scale of operations larger the scale of operations Raja will be the form working capital requirements small of the scale of operations smaller will be the forms working capital requirements
Manufacturing cycle
manufacturing cycle also affects the working capital news needs manufacturing cycle refers to the time gap between the purchase of raw materials and the production finished goods lost at the manufacturing cycle larger will be the forms working capital requirements shutter the manufacturing cycle smaller will be the forms working capital requirements for example distillery which has long manufacturing cycle due to aging process required heavy investment in inventory where has hey Bakery having certain manufacturing cycle requires low investment in inventories
Business cycle
the working capital requirements depend upon the demand and sale of goods the demand and sale of goods usually increase when the economy is going through a boom place and decrease and the economy is is going through aliens space the effect of business cycle fixation on working capital has been shown below to avoid the the production problems arising due to seasonal fluctuations the form a follower policy of study production in all seasons that lies its resources to the full extent which means English of inventories in oxygen and their disposal in peak season since Srinu situations generally confirmed study pattern financial arrangements for seasonal working capital requirements should be made in advance
Production policy the production policy of the form affects the working capital by influencing the level of inventories FM form NGS engaged in a manufacturing of products the demand of fits of which is seasonal may follow any of the following 3 production process
- Seasonal production policy Increasing production during peak period maybe expensive due to increased cost of materials labour and other expenses . The firm will have to sustain its working force and physical facilities. Working capital requirements will be large during peak period and small during slack period.
- Steady production policy. Resources are utilised to the fullest extent. Accumulation of inventories during off season and their quick disposal during the peak season. Firm will be exposed to greater inventory cost and risks. The working capital requirements will follow a steady pattern.
- Diversified production policy. Manufacturing of original product during the peak period.
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