How does ‘Inflation’ affect the working capital requirements of a company? State.
Inflation is a situation of sustained increase in the general price level of goods and services. In such a situation, the working capital required to maintain a normal level of production and sale also increases. Inflation leads to increase in the cost of raw material, rise in wage rate, and rise in all other expenses and thus lead to a need for more working capital. The working capital requirement of a business thus, become higher with higher rate of inflation.
State any four factors which affects the requirements of working capital of a company.
Define ‘Capital Structure’.
Explain any four points that highlight the importance of financial planning.
Explain the following as factors affecting the requirements of fixed capital:
(i) Scale of operations;
(ii) Choice of technique;
(iii) Technology upgradation and
(iv) Financing alternatives.
