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Determinants of Working Capital

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❶The average length of the period of manufacture, i. On the other hand, if labor intensive technology is adopted, less investment in fixed assets and more investment in current assets which would lead to higher requirement of working capital.

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Some of the most determinants of working capital are: 1. Nature of business 2. Length of period of manufacture 3. Volume of business 4. The proportion of the cost of raw materials to total cost 5. Use of Manual Labour or Mechanisation 6. Need to keep large stocks of raw materials of finished goods 7.

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Some of the major determinants of working capital are discussed below: A company, as a general policy, wants to hold in balance as small a quantity of working capital as possible so long as undue solvency risks are not imposed on it. This is a logical approach indicating that working capital is a.

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In analyzing the determinants of working capital management, Chiou and Cheng (), found that there is an inverse relationship between capital structure of the firm and the two measures of liquidity: net liquid balance and working capital ratio. The determinants of working capital are items that have a direct impact on the amount invested in current assets and current liabilities. Managers like to keep a close watch over these factors, since working capital can absorb a large part of the funding that an organization has at its disposal.

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capital and short-term financing are referred to as working capital management (Nimalathason, ). It is the regulation, adjustment and control of the balance of current assets and current. Please do send us a request for Determinants of Working Capital tutoring and experience the quality yourself. Other topics under Working Capital Management: Aim of Working Capital Management.