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Match the following factors affecting the working capital requirement:

LIST-I (Factors)LIST-II (Explanation)
A.Level of CompetitionI. A firm allows credit to its customers. It may also get credit from its suppliers.
B.Credit AvailedII. A liberal credit policy results in a higher number of debtors, increasing the requirement of working capital.
C.InflationIII. May necessitate larger stocks of finished goods to meet urgent orders from customers
D.Credit AllowedIV. Larger amounts are required even to maintain a constant volume of production and sales.

Choose the correct answer from the options given below:

Solution

✅ Correct Option: 2

Higher competition requires larger stocks of finished goods to meet urgent orders (A-III). Credit availed refers to the credit a firm gets from its suppliers, reducing working capital needs (B-I). Inflation means larger amounts are required even for the same volume of production and sales (C-IV). A liberal credit policy allowed to customers increases debtors and working capital (D-II). Hence A-III, B-I, C-IV, D-II.

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