CA Intermediate | Working Capital | Pan Dukaan VS Reliance | Determinants of Working Capital
If I run a large business where my production is huge, my sales are massive, and everything operates on a grand scale, I will naturally need a large investment for my working capital . Let me explain how: because my business and production are large-scale, my raw material warehouses will be just as massive, my shops for finished goods will be equally huge, and my debtors will borrow on a similarly large scale. Is there any comparison between the working capital of a small pan shop and that of a massive company like Reliance? If I am a small businessman, my working capital requirements will always remain small, but if I run a large business, my working capital requirements will always be large. So, if you were to discuss this with me, it comes down to scale: if my scale (S-C-A-L-E) is large, I need a large working capital, and if my scale is small, I need a small working capital. Therefore, my scale decides my working capital, making it one of the most important determinants of my working capital requirements. Another factor would be my operating cycle. ---
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