Which of the following factors determine the requirements of working capital of a firm?
A. Nature of Business
B. Technology and Manufacturing Policy
C. Management Skills
D. Credit Policy
E. Market and Demand Conditions
Choose the correct answer from the options given below:
Codes

Correct option is B

Factors that determine the requirements of working capital of a firm include:
a. Nature of Business: The nature of the business, such as the industry type, production cycle, and seasonality, influences the working capital needs. For example, a manufacturing business may require higher working capital compared to a service-based business.
b. Technology and Manufacturing Policy: The level of technology and the manufacturing policy adopted by a firm can impact the working capital requirements. Technological advancements may reduce the need for inventory or improve efficiency, affecting the amount of working capital needed.
d. Credit Policy: The credit policy of a firm, including the terms and conditions offered to customers and suppliers, affects the working capital requirements. A liberal credit policy may increase accounts receivable and require higher working capital.
e. Market and Demand Conditions: Market conditions, including the level of competition, customer demand, and sales cycles, impact the working capital requirements. Fluctuations in demand or seasonal variations can affect the cash flow and working capital needs of a firm.
c. Management Skills: While management skills are crucial for effective working capital management, they do not directly determine the requirements of working capital. However, efficient management practices can optimize working capital utilization and improve cash flow.
Therefore, options a, b, d, and e are the factors that determine the requirements of working capital for a firm.