Working capital requirements are low when an organisation has...............
Answer & explanation
Correct answer: option 4
The correct answer is option 4- High creditors.
When an organization has high creditors, its working capital requirements tend to be low. This means that the organization has negotiated longer payment terms with its suppliers. As a result, it can delay paying its bills while still receiving goods and services. This effectively extends the organization's available cash cycle, reducing the immediate need for working capital.
Other options:
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High technology: While high technology may streamline operations and improve efficiency, it doesn't necessarily directly impact working capital requirements. Technology upgradation generally results in more fixed capital and not working capital.
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High debtors: High debtors mean that the organization has a large amount of outstanding accounts receivable. This ties up funds in unpaid invoices, potentially increasing the need for working capital to cover day-to-day expenses while waiting for customers to pay.
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High inventory: Having high levels of inventory can tie up funds and increase working capital requirements. It requires resources to purchase, store, and manage inventory, which can strain liquidity.