determinants of working capital

Working capital requirement of a firm is directly influenced by the size of its business operation. The total working capital requirement is determined. These factors, however, affect different enterprises differently.They also vary from time to time. Semi-variable Working Capital – The fund requirements remains same up to a stage, then increases with sales and time. Big business organizations require more working capital than the small business organization. An organisation that deals in services or trading will not require much of working capital. If the manufacturing process is long, huge amount of working capital will be required and vice versa. Determinants of working capital 1. 2. by a wide variety of factors.. WORKING CAPITAL The capital which is needed for the regular operation of business is called working capital. The amount of working capital needed is highly influenced by the length of manufacturing cycle. Working capital cycle refers to the time required to convert the raw materials into finished goods and up to the stage of conversion of finished goods into cash form. Working Capital Cycle determines working capital requirement. Determinants of Working Capital Number of factors has an influence on the size and need of working capital in an organisation. In any business, managing working capital is a never-ending task for the finance and accounting personnel. Temporary Working Capital – Seasonal or special requirements for funds. In this article, the author investigates the determinants of working capital requirements of 66 firms in Nigeria using panel data for the period 1997–2007. Permanent Working Capital – Funds necessary to carry the operations of a business. understand the role and determinants of working capital. So no definite rule or formula can be prescribed for calculating the amount of working capital. The relationship between current assets and current liability items is called working capital of the organization. The following are five determinants of working capital requirement: (i) Type of Business: Working capital requirement of a firm depends on its nature of business. Nature Of Business 7. Therefore, the size of organization is one of the major determinants of working capital. 8. Internal and external factors that affect working capital. so utmost care should be taken to shorten the period of cycle in order to minimize the working capital requirements. Types of Working Capital. DETERMINANTS OF WORKING CAPITAL • PRESENTED BY- SADIQUE ALI ENROLLMENT NO-A165386 • SUBMITTED TO- Dr. Syed Khaja Safiuddin ASSISTANT PROFESSOR 2. Determinants of Working Capital Requirement The purpose of this paper is to empirically analyze and identify key factors affecting working capital behavior of companies listed on the Egyptian Stock Exchange.,Working capital requirement and cash conversion cycle were used to proxy working capital behavior. DETERMINANTS OF WORKING CAPITAL. However, the effects of the determinants of working capital management differ depending on enterprise size and enterprise age. If the working capital cycle is long, there is a need of more amount of working capital and vice versa. A firm should plan its operations in such a way that it should have neither too much nor too little working capital. A constant inflow of funds has to be ensured to keep the daily operations of the company motoring along smoothly. The size of organization is one of the organization • PRESENTED BY- ALI. Dr. Syed Khaja Safiuddin ASSISTANT PROFESSOR 2 and external factors that affect working capital than the small organization! 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