Question: What Is Working Capital And Its Factors?

What are the factors determining cost of capital?

There are various factors that can affect the cost of capital.

Broadly, factors can be classified as ‘fundamental factors’ and ‘economic and other factors’.

Fundamental factors are market opportunities, capital provider’s preference, risk, and inflation..

What are the factors determining capital structure?

The various factors which influence the decision of capital structure are:Cash Flow Position: … Interest Coverage Ratio (ICR): … Debt Service Coverage Ratio (DSCR): … Return on Investment: … Cost of Debt: … Tax Rate: … Cost of Equity: … Floatation Costs:More items…

Which is not a factor determining working capital?

Main factors affecting the working capital are as follows: (1) Nature of Business: … Therefore, capital remains invested for a long time in raw material, semi-finished goods and the stocking of the finished goods. Consequently, more working capital is required.

Which of the following determines the working capital?

The following points highlight the top thirteen factors that determine the working capital, i.e, (1) Nature or Character of Business, (2) Size of Business/Scale of Operations, (3) Production Policy, (4) Manufacturing Process/Length of Production Cycle, (5) Seasonal Variations, (6) Working Capital Cycle and others.

What are the components of working capital?

These are three main components associated with working capital management:Accounts Receivable. Accounts receivable are revenues due—what customers and debtors owe to a company for past sales. … Accounts Payable. … Inventory.

How do you manage working capital?

Tips for Effectively Managing Working CapitalManage procurement and inventory. Prudent inventory management is an important factor in making the most of your working capital. … Pay vendors on time. … Improve the receivables process. … Manage debtors effectively. … Make informed financing decisions. … 2 Comments.

What are some examples of working capital?

What Can Working Capital Be Used for?Working capital is the money used to cover all of a company’s short-term expenses, including inventory, payments on short-term debt, and day-to-day expenses—called operating expenses. … For example, retail businesses often experience a spike in sales during certain times of the year, such as the holiday season.More items…•