Question

A businessman who wants to start a manufacturing concern approaches you to suggest him whether the following manufacturing concerns would require large or small working capital: 

i. Bread 

ii. Sugar 

iii. Coolers 

iv. Furniture manufacturing against specific orders, and 

v. Motorcars Give your viewpoint with reasons in each of the above cases.

Answer 1

i. Bread: It needs less working capital as product is generally sold for cash. 

ii. Sugar: It will require large working capital because of longer operating cycle. 

iii. Coolers: It is a seasonal product. So, it requires more working capital during peak season. 

iv. Furniture Manufactured against Orders: It requires less working capital as no inventory has to be maintained. 

v. Motorcars: It will require large working capital due to long operating cycle.