Question

Explain the following factor affecting the working capital requirement of a business:

Nature of business

Answer 1

The working capital requirements of a business are influenced by factors such as industry, size, operational cycle, and seasonality. 

1. Industry Characteristics: Working capital requirements vary depending on business structures, production processes, and sales cycles.
2. Seasonality: Seasonality refers to swings in demand and financial flows caused by seasonal trends or consumer preferences. During peak seasons, firms may need more working capital to improve production, inventory, and marketing to meet seasonal demand.