"Since Arun is planning to initiate the business from a small level, the quantum of inventory and debtors required is generally low." Which factor is highlighted by the aforesaid statement?

Option 1 -> Scale of operation refers to the size and magnitude of business activities, which directly determines the quantum of inventory and debtors needed.

Option 2 -> Level of debt relates to the amount of borrowed capital in the business, not the relationship between business size and inventory/debtors requirements.

Option 3 -> Source of finance concerns where funds come from (equity, loans, etc.), which is not what the statement addresses regarding inventory and debtors.

Option 4 -> Business cycle refers to economic fluctuations or the operating cycle of the business, not the initial size of operations.

Hence, Option 1: Scale of operation -> The statement clearly links the "small level" of business initiation with "low" quantum of inventory and debtors, which is a direct indication of how the scale/size of operations determines working capital requirements. Smaller operations naturally require less inventory to stock and generate fewer credit sales (debtors) compared to large-scale operations -> correct