"Others factors remaining the seeme, a trading business requires less working capital". Choose the factor that does not affect the working capital of company.

(A) Regulatory Frame Work

(B) Diversification

(C) Level of Collaboration

(D) Operating Efficiency

(E) Inflation

Choose the correct answer from the options given below :

(A), (B) and (C) only

The correct answer is option (2) : (A), (B) and (C) only

Factor affecting capital structure

• regulatory Framework: every company operates within a regulatory framework provided by the law e.g., public issue of shares and debentures have to be made under SEBI guidelines. Raising funds from banks and other financial institutions require fulfillment of other norms

Factor affecting fixed capital requirements

• Level of collaboration: At times, certain business organisations share each other's facilities. For example, a bank may use another's ATM or some of them may jointly establish a particular facility. This is feasible if the scale of operations of each one of them is not sufficient to make full use of the facility.

• Diversification: A firm may choose to diversify its operations for various reasons, With diversification, fixed capital requirements increase e.g., a textile company is diversifying and starting a cement manufacturing plant, Obviously, its investment in fixed capital will increase.

Factor affecting requirements of working capital

• Operating efficiency: Firms manage their operations with varied degrees of efficiency. For example, a firm managing its raw materials efficiently may be able to manage with a smaller balance. This is reflected in a higher inventory turnover ratio,

• 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