He factors affecting requirement of working capital are:
(i) Nature of Business: The requirement of working capital deperids on the nature of business. The nature of business is usually of two types: (a) Manufacturing and (b) Trading business. In the case of manufacturing business, more capital is required. On the contrary, in case of trading business, the goods are sold immediately after purchasing or sometimes the sale is affected even before the purchase itself. Therefore, very little working capital is required.
(ii) Scale of operations: There is direct link between the working capital and scale of operations. In other, words, more working capital is required in case of big organisation while less working capital is needed in case of small organisation.
(iii) Business cycle: The need for the working capital is affected at various stages of the business cycle. During the boom period, the demand of a product increases and sale also increases. Therefore, more working capital is needed, on the contrary during the period of the depression the demand declines. It affects both the productioand sales of goods. Therefore, in such situation less working capital is required.
(iv) Seasonal factors: Some goods are in demand throughout the year while some other products have seasonal demand which have uniform demand throughout the year, their production and sales are continuous. The seasonal manufacturing units whose production is limited to particular season like coolers in summers, room heater/geyser in winters, needs little capital.