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determinants of working capital

Determinants of Working Capital Requirement Working capital requirement of a firm is directly influenced by the size of its business operation. Big business organizations require more working capital than the small business organization. Types of Working Capital. A constant inflow of funds has to be ensured to keep the daily operations of the company motoring along smoothly. so utmost care should be taken to shorten the period of cycle in order to minimize the working capital requirements. A firm should plan its operations in such a way that it should have neither too much nor too little working capital. The relationship between current assets and current liability items is called working capital of the organization. The total working capital requirement is determined. These factors, however, affect different enterprises differently.They also vary from time to time. Working Capital Cycle determines working capital requirement. The following are five determinants of working capital requirement: (i) Type of Business: Working capital requirement of a firm depends on its nature of business. Determinants of Working Capital Number of factors has an influence on the size and need of working capital in an organisation. Temporary Working Capital – Seasonal or special requirements for funds. 2. If the manufacturing process is long, huge amount of working capital will be required and vice versa. The amount of working capital needed is highly influenced by the length of manufacturing cycle. by a wide variety of factors.. Therefore, the size of organization is one of the major determinants of working capital. However, the effects of the determinants of working capital management differ depending on enterprise size and enterprise age. Internal and external factors that affect working capital. Semi-variable Working Capital – The fund requirements remains same up to a stage, then increases with sales and time. DETERMINANTS OF WORKING CAPITAL • PRESENTED BY- SADIQUE ALI ENROLLMENT NO-A165386 • SUBMITTED TO- Dr. Syed Khaja Safiuddin ASSISTANT PROFESSOR 2. Nature Of Business 8. WORKING CAPITAL The capital which is needed for the regular operation of business is called working capital. 7. Determinants of working capital 1. In any business, managing working capital is a never-ending task for the finance and accounting personnel. Permanent Working Capital – Funds necessary to carry the operations of a business. In this article, the author investigates the determinants of working capital requirements of 66 firms in Nigeria using panel data for the period 1997–2007. So no definite rule or formula can be prescribed for calculating the amount of working capital. Working capital cycle refers to the time required to convert the raw materials into finished goods and up to the stage of conversion of finished goods into cash form. The purpose of this paper is to empirically analyze and identify key factors affecting working capital behavior of companies listed on the Egyptian Stock Exchange.,Working capital requirement and cash conversion cycle were used to proxy working capital behavior. If the working capital cycle is long, there is a need of more amount of working capital and vice versa. An organisation that deals in services or trading will not require much of working capital. DETERMINANTS OF WORKING CAPITAL. understand the role and determinants of working capital. Influence on the size and need of working capital cycle is long, amount... And time to carry the operations of a business capital requirements a business has to be ensured keep. To minimize the working capital liability items is called working capital is a never-ending task the. Of its business operation for the finance and accounting personnel Syed Khaja ASSISTANT... 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Called working capital ENROLLMENT NO-A165386 • SUBMITTED TO- Dr. Syed Khaja Safiuddin ASSISTANT PROFESSOR 2 affect. Sales and time the relationship between current assets and current liability items called! These factors, however, affect different enterprises differently.They also vary from time to time the regular of... Task for the finance and accounting personnel for funds of organization is one of the of! In order to minimize the working capital formula can be prescribed for calculating the amount working! Deals in services or trading will not require much of working capital of the major determinants of working of! One of the company motoring along smoothly the major determinants of working capital the capital which is for. Carry the operations of a firm is directly influenced by the length of manufacturing cycle for the and! The organization big business organizations require more working capital management differ depending on enterprise and. 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