BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -If a company has a high degree of operating efficiency then it will require less working capital; however, if a company has a low degree of operating efficiency then it will require more working capital. (Operating cycle of a firm is the time period from the purchase of raw material to the realisation from debtors).

Detailed explanation-2: -A company which has a better operating efficiency has to invest less in stock and the debtors. Therefore, it requires less working capital, while the case is different in respect of companies with less operating efficiency.

Detailed explanation-3: -Companies with a high inventory of physical goods require more working capital than ones that don’t. Similarly, businesses looking to grow will need more working capital than those looking to maintain their size.

Detailed explanation-4: -Working capital management also involves the timing of accounts payable (i.e., paying suppliers). A company can conserve cash by choosing to stretch the payment of suppliers and to make the most of available credit or may spend cash by purchasing using cash-these choices also affect working capital management.