Which of the following is not a factor affecting the working capital requirements of a business firm?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Technology Upgradation
Technology Upgradation → This affects capital expenditure (fixed capital requirements), not day-to-day working capital needs.
Factors that affect working capital requirements include:
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Production Cycle → Longer cycles require more working capital.
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Availability of Raw Material → Scarce or irregular supply increases the need for higher inventories, thus more working capital.
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Inflation → Increases prices of inputs, raising working capital needs.