From the following, choose the factors affecting working capital requirements :

(A) Growth prospects

(B) Inflation

(C) Diversification

(D) Cash flow position

(E) Level of competition

Choose the correct answer from the options given below :

(A), (B) and (E) only

The correct answer is option (3) : (A), (B) and (E) only

1. Growth Prospects: If the growth potential of a concern is perceived to be higher, it will require larger amount of working capital so that it is able to meet higher production and sales target whenever required.

2. Inflation: With rising prices, larger amounts are required even to maintain a constant volume of production and sales. The working capital requirement of a business thus, become higher with higher rate of inflation.

3. Diversification - It is a factor affecting Fixed working capital .

4. Cash flow position - It is a factor affecting Financing decision of organizations.

5. Level of Competition: Higher level of competitiveness may necessitate larger stocks of finished goods to meet urgent orders from customers.