(1) Nature of Business:
The requirement of working capital depends on the nature of business. The nature of business is usually of two types: Manufacturing Business and Trading Business.
(2) Scale of Operations: More working capital is required in case of big organisations while less working capital is needed in case of small organizations.
(3) Business Cycle:
The need for the working capital is affected by various stages of the business cycle. During the boom period, the demand of a product increases and sales also increase. Therefore, more working capital is needed.
(4) Seasonal Factors:
Some goods are demanded throughout the year while others have seasonal demand. Goods which have uniform demand the whole year their production and sale are continuous. Consequently, such enterprises need little working capital.
(5) Production Cycle:
Production cycle means the time involved in converting raw material into finished product. The longer this period, the more will be the time for which the capital remains blocked in raw material and semi-manufactured products.
(6) Credit Allowed:
Those enterprises which sell goods on cash payment basis need little working capital but those who provide credit facilities to the customers need more working capital.
(7) Credit Availed:
If raw material and other inputs are easily available on credit, less working capital is needed. On the contrary, if these things are not available on credit then to make cash payment quickly large amount of working capital will be needed.
(8) Operating Efficiency:
Operating efficiency means efficiently completing the various business operations. Operating efficiency of every organisation happens to be different.
(9) Availability of Raw Material:
Availability of raw material also influences the amount of working capital. If the enterprise makes use of such raw material which is available easily throughout the year, then less working capital will be required, because there will be no need to stock it in large quantity.
(10) Growth Prospects:
Growth means the development of the scale of business operations (production, sales, etc.). The organisations which have sufficient possibilities of growth require more working capital, while the case is different in respect of companies with less growth prospects.
