Broadly Explain the factors affecting working capital requirement. (Need Details) Or, Explain the factors determining the need for working capital. Or, Describe in brief the various factors which are taken into account in determining the working capital needs of a firm.

 A firm should have neither low nor high working capital. Low working capital involves more risk and more returns, high working capital involves less risk and less returns.

 

A firm should plan itd operation in such a way that is shoult have neither too much nor too little working capotal. The total working capital requirement is determined by a wide variety of factors.these factors,however,affect different enterprise differently. Following are the important factors generally influencing the orking capital requirements:

 

1. Nature of the business –the nature of business and the working capital requirement of a business are interlinked. A manufacturing enterprise has a long operating cycle than that of an operating cycle of a service enterprise. An enterprise involved in production would require more working capital than a service sector enterprise.

2. Size of the business –the requirement of working capital fluctuates for seasonal business. The working capital needs of  such business may increase considerably during peak season and decrease during off season.

3. Manufacturing cycle-the manufacturing cycle starts with the input of raw materials and ends with finished products.  If the cycle involves a linger period, the need for working capital would be more and vice-versa.

4. Availability of raw materials.

5. Market condition

6. Business/production  policy

7. Methods of purchase and sale of commodities

8. Converting working assets into cash

9. Seasonal variation in business

10. Risk in business

11. Size of labor force

12. Price level changes

13. Rate of turnover

14. State of business activity

How would you assess the working capital requirement of poultry industry? Or, Assessments/forecast of working capital requirements

 The shortage or surplus of working capital, both are harmful for the organization especially for poultry industry. So it is important for the assessments of working capital. The following considerations which is necessary for assessing the working capital requirement for a poultry industry:

 

1. The information of estimated production of poultry business

2. The value of raw material, labor and overheads for unit or sum of production

3. Time lag in store of raw materials of poultry product

4. Time lag in production process of poultry product

5. Stag in the warehouse of finished product

6. Delivery process of the poultry product

7. Collection period from debtors

8. Credit allowed by suppliers

The main factors of assessing working capital are a. Inventories ofstock

-raw materials

-work in process :and

-finished goods b.debtors: and c.cash

Importance of working capital loan for running an agro-industrial project or an industrial project/or Advantages Working Capital Loan

 Working capital is the life blood for running an agro/industrial project. It is very essential to maintain smooth running of a business. The main advantages or importance of working capital are as follows:

 1. Supports as initial partial capital: The working capital loan can helps to adequate liquidity to developing agro/industrial project.

2. Strengthen the Solvency: It helps to operate the smooth flow of production and business without any financial problem for making the payment of short- term liabilities.

3. Enhance the project growth: Sufficient working capital enables to make prompt payments and helps in creating goodwill.

4. Regular payment of operating expenses-operating expenses of an organization such as wages of labour, materials purchase and other  expense needs sufficient wirking capital.

5. Easy obtaining loan: A firm having adequate working capital, high solvency and good credit rating can arrange loans from banks in easy and favorable terms.

6. Regular supply of raw material: Quick payment of credit purchase of raw materials ensures the regular supply of raw materials from suppliers.

7. Smooth business operation: It maintains a good shape in entire developments for a developing project.

8. Ability to face crisis: In crisis to emergency needs, it enables to meet working capital requirement for the project.

9. Possibility of getting cash discount—sufficient working capital increase the purchasing ability of an organization and cash payment for purchased goods give discount from seller.

10. Exploitation of new and favorable market condition-sufficient working helps to jump at any new market and any favorable position of a market.