Question

Determinant of working capital is

• A. Size of the enterprise
• B. Period of manufacturing process
• C. Availability of raw materials
• D. All of these

Hint:

Working capital requirement = Function of size + production cycle + raw material supply.

Answer 1

The Correct Option is D

Step 1: Understanding working capital.
Working capital refers to the difference between current assets and current liabilities, used for day-to-day operations.
Step 2: Determinants of working capital.
- Size of enterprise: Larger enterprises require more working capital.
- Period of manufacturing: Longer processes require more capital tied up in production.
- Availability of raw materials: Easy availability reduces the need for large stock; scarcity increases working capital needs.
Step 3: Option analysis.
- (A) Size of enterprise: Correct but only one factor.
- (B) Period of manufacturing: Correct but incomplete.
- (C) Availability of raw materials: Correct but only one aspect.
- (D) All of these: Correct, because working capital depends on multiple factors together.
Step 4: Conclusion.
Working capital is determined by the size of enterprise, manufacturing period, and raw material availability.