What are the Factors Affecting Working Capital Requirements?

Working capital is the short-term capital that is used to make sure that organization is able to carry out its day to day activities without any hinderance. The working capital can be affected by many factors:

· The working capital can be significantly affected by the type of organization or the nature of their work, whether it is service oriented or manufacturing oriented, in manufacturing-oriented organization working capital requirements are high.

· The size of the company can also have impact on the working capital requirement, large companies would require normally more working capital than a small company operation.

· The working capital can be also be affected by the amount of credit provided and the number of days within which they have to pay back the debt by the suppliers of the firm. If the supplier provides raw materials on good terms then the working capital requirement would be reduced.

· Certain companies which are seasonal in nature their working capital would increase significantly when the demand is peak and reduce when the demand falls.

· Working capital can also be affected by as to at what terms and condition the company is able to borrow the funds from the bank or creditors.