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प्रश्न
Justify the following statement.
There are various factors affecting the requirement of working capital.
उत्तर
Justification:
There are various factors affecting the requirement of working capital. Some of them are as follows:
(a) Nature of business: The requirement of working capital depends on the nature of business. The nature of business is usually of two types:
• Manufacturing Business and
• Trading Business.
- In the case of a manufacturing business, it takes a lot of time in converting raw material into finished goods. Therefore, more working capital is required.
- On the contrary, in the case of trading business, the goods are sold immediately after purchasing, or sometimes the sale is affected even before the purchase itself. Therefore, less working capital is required.
(b) Size of Business: There is a direct link between working capital and the size of the business.
In other words, more working capital is required in the case of a big organisation. Whereas, less working capital is required in the case of a small organisation.
(c) Business cycle: The need for working capital is affected by various stages of the business.
For instance:
- During the boom period, the demand for a product increases, and sales also increase. Thus, more working capital is required.
- During the depression period, the demand declines and it affects both the production and sales of goods.
Thus, less working capital is required.
(d) Production cycle: Production cycle means the time involved in converting raw material into a finished product. When the period of the production cycle is more, more working capital will be needed.
On the contrary, when the period of the production cycle is less, less working capital will be needed.
(e) Volume of Cycle: This is the most important factor affecting the size of working capital. The volume of sale and the size of working capital are directly related to each other. For instance, if the volume of sales is more, there is an increase in the amount of working capital. But if the volume of sales is less, there is a decrease in the amount of working capital.
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संबंधित प्रश्न
Match the correct pairs:
| Group 'A' | Group 'B' | ||
| (1) | Working capital | (a) | Redeemed capital |
| (2) | Equity share capital | (b) | Secretary |
| (3) | Share warrant | (c) | Shares do not have distinctive numbers |
| (4) | Recommendation of dividend | (d) | Fixed assets |
| (5) | Fungibility | (e) | The link between SEBI and Depository |
| (f) | Board of Directors | ||
| (g) | Registered document | ||
| (h) | Sum of current assets | ||
| (i) | Bearer document | ||
| (j) | Permanent capital |
Select the correct answer from the options given below and rewrite the statement.
______ refers to any kind of fixed asset.
Write a word or a term or a phrase which can substitute the following statement.
Capital needed to acquire fixed assets which are used for longer period of time.
Write a word or a term or a phrase which can substitute the following statement.
The sum of current assets.
Write a word or a term or a phrase which can substitute the following statement.
The excess of current assets over current liabilities.
Write a word or a term or a phrase which can substitute the following statement.
The process of converting raw material into finished goods.
State whether the following statement is true or false.
The business will require huge funds if assets are acquired on a lease basis.
Answer in one sentence.
What is fixed capital?
State any four factors affecting fixed capital requirement.
Justify the following statement.
Fixed capital stays in the business almost permanently.
Answer the following question.
Discuss the factors determining working capital requirement.
Fixed capital is also referred as circulating capital.
______ capital is used to carry out day-to-day business activities.
Distinguish between Fixed Capital and Working Capital.
Distinguish between Fixed Capital and Working Capital.
Distinguish between the following.
Fixed Capital and Working Capital.
Explain the following term/concept:
Fixed capital
Liberal credit policy creates a problem of bad debts.
Distinguish between the following.
Fixed Capital and Working Capital.
