State any four factors which affect the requirements of working capital of a company.

Factors which affect the requirements of working capital are:

(i) Nature of business, as trading organisation requires smaller amounts of working capital than manufacturing organisations as there is no processing. Service industries require less working capital as they do not have to maintain inventory.

(ii) Scale of operations, as firms operating on a higher scale require more working capital as their quantum of inventory and debtors is generally high.

(iii) Business cycle, as in case of boom, larger working capital is required as the production and sales are more.

(iv) Seasonal factors, as peak season requires higher working capital than lean season due to higher level of activity.

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