Following are the factors affecting working capital of a company:
(i) Business cycle: During **, when sales are high, higher amount of working capital is required as compared to the depression **.
(ii) Operating efficiency: Less requirement of working capital will be there in a firm in the presence of best sales effort, ideal debtors turnover ratio and higher inventory turnover ratio.
(iii) Availability of raw material: Higher lead time (i.e. time lag between the placement of order and actual receipt of the materials) and interrupted availability of raw materials will raise the requirement of working capital.
(iv) Level of competition: Working capital requirements will be more if level of competition is high.
