Which of the following points are considered as factors determining the working capital of a firm?

A. Basic nature of Business

B. Business cycle fluctuations

C. Credit Policy of the firm

D. Long-term source of finance

E. Employee Skills

Choose the correct answer from the options given below:

Correct option is C

The working capital of a firm is influenced by multiple factors, primarily related to its business operations, financial policies, and external economic conditions. The correct factors include:
· Basic nature of Business (A): The type of industry (e.g., manufacturing, trading, or service) affects the requirement for working capital. Manufacturing businesses generally require more working capital compared to service-based businesses.
· Business cycle fluctuations (B): Economic conditions such as recessions or booms influence the demand for goods and services, thereby impacting the working capital needs.
· Credit Policy of the firm (C): The credit terms extended to customers and received from suppliers directly impact the working capital. A firm with lenient credit policies may require more working capital.
Incorrect options:
· Long-term sources of finance (D): These relate to capital structure decisions rather than working capital.
· Employee Skills (E): While crucial for business operations, employee skills do not directly impact working capital requirements.