‘The larger the lead time, the larger the quantity of material to be stored, and the larger shall be the amount of working capital required.’
The factor affecting the requirement of working capital discussed in the above statement is :
‘The larger the lead time, the larger the quantity of material to be stored, and the larger shall be the amount of working capital required.’
The factor affecting the requirement of working capital discussed in the above statement is :
Show Hint
- Operating efficiency
- Inflation
- Availability of raw material
- Production cycle
The Correct Option is C
Solution and Explanation
The statement talks about lead time. Lead time is the gap between placing an order for material and getting it.
A longer lead time means the firm must store a larger stock of material, so it needs more working capital.
We must name the factor that this describes.
Step 2: Identify the factor:
If raw material is not easily or quickly available, the firm keeps a large stock. This blocks funds in inventory.
This is the factor called availability of raw material. So option (C) is correct.
Step 3: Check options (A) and (B):
(A) Operating efficiency means using resources well, such as cutting waste and speeding up the cycle. It is not about lead time.
(B) Inflation means rising prices, which raises the money needed for the same output. It is not about lead time.
Step 4: Check option (D) Production cycle:
Production cycle is the time between receiving raw material and turning it into finished goods.
It is about the time inside production, not the time taken to obtain material. So (D) is wrong.
Final Answer:
The factor discussed is availability of raw material, option (C).
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The factor affecting dividend decision discussed above is :
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