Business Studies Solved Question Papers 2024 [AHSEC Class 12 Business Studies Solved Question Papers]

Business Studies Solved Question Paper 2024
AHSEC Class 12 Solved Question Paper

For New Course Students

Full Marks: 80

Pass Marks: 24

Time: Three hours

The figures in the margin indicate full marks for the questions.

1. (a) At what level of management a managing director works?               1

Ans: Top level management

(b) What is meant by fatigue study?       1

Ans: It refers to the duration and frequency of rest intervals to complete a particular job. The rest refreshes the workers. They work again with full energy and stamina. Long working hours, poor working conditions, unsuitable work can also be the causes of fatigue. It should be reduced.

(c) What is policy?                           1

And: Policy can be defined as organisation’s general response to a particular problem. In simple words, it is the organisation’s own way of handling the problems. Example: Different business firms may follow different sales policies as stated below: “We don’t sell on credit”; “It is our policy to deal with wholesalers only.”

Or

Give an example of policy.

Ans: Example: Different business firms may follow different sales policies as stated below: “We don’t sell on credit”; “It is our policy to deal with wholesalers only.”

(d) What is meant by money supply in the economy?     1

Ans: The money supply is the total amount of cash and cash equivalents, such as savings account balances, circulating in an economy at a given point in time.

(e) Responsibilities flow upward/downward. (Choose the correct word)       1

Ans: Upward

(f) Selection is a positive process.             1

Ans: False, Recruitment is Positive Process because it is concerned with attracting qualified and competent individuals to apply for a job while selection is choosing the best among them and rejecting the unsuitable candidates. That is why it is a negative process.

2. What is the significance of dividend decision? 2

Ans: Dividend policy must be evaluated in light of the objective of the firm namely, to choose a policy that will maximize the value of the firm to its shareholders. The dividend policy of a company reflects how prudent its financial management is. The future prospects, expansion, diversification mergers are effected by dividing policies and for a healthy and buoyant capital market, both dividends and retained earnings are important factors.

Or

What is trademark?

Ans: Trademark simply means mark of a trade carried on by an identified entity. It is usually a sign mark or a symbol, word or words.

3. Write two significances of packaging.                2

Ans: Importance (Functions) of Packaging

a) Safety of the Products. The main function of packaging is to protect the things from dust, water, moisture, insects, etc. Good packing saves the products against perishing, loss and other damages.

b) Facility in Marketing Activities. Due to the packing, the movement of the products, shifting, preserving, opening, collect­ing and storage, become economical and easier for both the mid­dlemen as well as the consumers.

4. Write two responsibilities of a consumer to safeguard his interest.        2

Ans: Main responsibilities of consumer are given as under:        

a) Be aware about their right: Consumer must be aware of their own rights.

b) Quality conscious: while making purchase, consumer should look for quality certification.

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ALSO READ: AHSEC CLASS 12 BUSINESS STUDIES SOLVED QUESTION PAPERS

BUSINESS STUDIES SOLVED QUESTION PAPERS 2012

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5. What is deviation in controlling?                         2

Ans: Deviation refers to the difference between actual performance and standard work. Ans: Under controlling deviations are sought to be noticed in the actual work progress and the standards already determined, the causes of deviations are found out and corrective action is taken so that in future the mistakes are not repeated.

6. Write three features of formal communication.                           3

Ans: Following are the chief characteristics of the formal communication

(1) Written and Oral: Formal communication can both be written and oral. Daily works are handled through oral communication, while the policy matters require written communication.

(2) Formal Relations: This communication is adopted among those employees where formal relations have been established by the organisation. The sender and the receiver have some sort of organisational relations.

(3) Prescribed Path: The communication has to pass through a definite channel while moving from one person to another. For example, to convey the feelings of a worker to the manager, the foreman’s help has to be sought.

7. Write the features of organising.                         3

Ans: Nature or characteristics of organisation

a) Division of Labour: Every organisation is characterized by the division of work.  The total efforts of the group are divided into different functions and each function is assigned the function for which he is observed to be suited best.

b) Co-ordination: As different persona is assigned different functions and all these functions aim at achieving organisational goals, hence necessary relationships are established between them so as to co-ordinate all the activities of all the people of the organisation.

c) Objectives: Organisations exist to achieve objectives. Without objectives organisations cannot exist for a long period.

Or

Write the elements of planning promises.

Ans: Elements of Planning premises:

(a) Internal and external premises: Internal premises are those which exist within the business enterprise. 

External premises centre round the markets and derived from the external environment surrounding the business.

(b) Controllable. Semi- controllable and non-controllable premises:

Controllable premises are those within the control of a business enterprise such as, men, Monet, materials, policies, procedure, programmers etc. They can be controlled but a business enterprise to ensure better sales of its products.

Semi- controllable premises are those which can be partially controlled by a business enterprise like, labour position on the market.

Non-controllable premises are those that lie beyond the control of a business enterprise. Ware, natural calamities and external environment factors are non- controllable premises.

(c) Tangible and Intangible Premises

Tangible Premises can be measured in quantitative terms. They include units of production and sale, money, time, hours of work, etc.

Intangible Premises cannot be measured in quantitative terms. They include goodwill of the business, employee's morale, employee's attitude and public relations.

(d) Constant and Variable Premises

Constant Premises do not change. They remain the same, even if there is a change in the course of action. They include men, money and machines.

Variable Premises are subject to change. They change according to the course of action. They include union-management relations.

8. Write three important socio-cultural factors that affect business.     3

Ans: Social and cultural factors: The social and cultural environment of business includes factors like customs, traditions, values, beliefs, poverty, literacy, life expectancy rate, regional festivals etc. The businessman cannot overlook the components of social and cultural environment as these components may not have immediate impact on the business but in the long run the social environment has great impact on the business.

Or

Write three differences between ‘time study’ and ‘motion study’.

Ans: Difference between time study and motion study:

(a) Meaning: Time study helps in determining the time required by an average skill worker to efficiently perform a particular job. Time study helps in determining the standard time for the job.

Motion study is designed to eliminate unnecessary motions and to reinforce necessary motions. It is a close observation of analyzing the body movements of the worker performing the job.

(b) Aim: Time study aims at determination of standard time, to determine the labour cost and to create time management among the employees.

Motion Study: It aims at eliminating unproductive movements of the employees at work.

(c) Development of new product: Time study does not develop new methods of doing work.

Motion study develops new methods of doing work by eliminating unnecessary movements.

9. Write three important functions of top-level management.                   3

Ans: The functions of top management are:

a) Determining the objectives of the enterprise: They determine both long term as well as short term objective of the enterprise.

b) Framing of plans and policies: They formulate plans and policies to achieve the desired objectives.

c) Assigning activities to different individuals: They assign jobs to different individuals working at middle level.

Or

Write three factors of primary market.

Ans: Factors of primary market:

a) Availability of funds: Capital market helps to raise long term funds from both domestic and as well as foreign institutional investors.

b) Mobilization of savings: Capital market mobilizes the savings of individuals and institutions to productive channels. It facilitates flow of long term capital from those who have surplus capital to those who need capital.

c) Industrial growth: it plays a significant role in the economic development of a country. It facilitates increase in production and productivity in the economy and hence enhances the economic welfare of the society.

10. Explain the techniques of scientific management.                     5

Ans: Taylors has suggested the following techniques of scientific management:

1. Scientific Task Setting: The first technique of scientific management is the scientific task setting. The work should be designed by the management is such a way that an average worker can be able to do the work within a given period of time. It should not be higher than the average capacity of the worker nor lower than his capacity.

2. Work study: Work study is the detailed analysis of an activity with an objective to remove inefficiency and find out the best way to perform the work. work study includes the following techniques:

a) Fatigue study: It refers to the duration and frequency of rest intervals to complete a particular job. The rest refreshes the workers. They work again with full energy and stamina. Long working hours, poor working conditions, unsuitable work can also be the causes of fatigue. It should be reduced.

b) Method study: It refers to identify the most suitable, economical way of doing a particular activity. To conduct this study, process chart, operation research technique can be used. The main objective is to minimize the cost of production and maximize the quality of the work.

c) Motion Study: Motion study is designed to eliminate unnecessary motions and to reinforce necessary motions. It is a close observation of analyzing the body movements of the worker performing the job. This study helps in analyzing that if any element of the job can be eliminated or not.

d) Time study: This study helps in determining the time required by an average skill worker to efficiently perform a particular job. Time study helps in determining the standard time for the job. This standard time is then fixed for the workers for performing the job. So, time study is used to measure precisely the time required in doing every element of a job with the purpose of deciding the fair day’s work.

3) Mental Revolution: Taylor emphasized the mutual cooperation between the workers and the management as the human element comprising of worker and management is essentially a very sensitive factor of production. The basic idea behind the mental revolution is to change the mental attitude of the workers and the management towards each other. Mental revolution requires that there should be perfect cooperation and coordination between the efforts of labour and the management.

Or

Distinguish between selling and marketing.

Ans: Ans: Difference between selling & marketing concept

Selling	Marketing
Selling starts with the seller and the needs of the seller.	Marketing starts with the buyer and the needs of buyer
Seeks to quickly convert products into cash.	Seeks to convert customer ‘needs’ into products
Seller is the centre of business universe.	Buyer is the centre of the business universe.
Views Business as a goods producing process.	Views businesses as a customer satisfying process.
Seller preference determines the formulation of marketing mix.	Buyer determines the shape marketing mix should take.
Selling is product oriented.	Marketing is customer oriented.
Seller’s motives dominate marketing communication.	Marketing communication is looked upon as a tool for communicating the benefits / satisfactions provided by the product.

11. Write five functions of money market.                          5

Ans: The major functions of money market are given below:

a) Economic Development: The money market helps in economic development of a country by providing short term funds to both public and private institutions without any discrimination.

b) Funds for government: Money market helps the government in borrowing short term funds at very low interest rate. This can be done by issuing treasury bills.

c) Return on idle funds: Money market helps the lenders to earn return on their idle or surplus funds for short period.

d) Implementation of Monetary Policy: Money market helps in implementing monetary policy of the central bank of any country.

e) Mobilsation of funds: The money market helps in transferring funds from one sector to another. The development of trade, commerce and industry depends on the mobilisation of financial resources.

Or

Write five features of capital market.

Ans: Features of Indian Capital Market

a) Dealing in Securities: It deals in long-term marketable securities and non-marketable securities.

b) Segments: It included both primary and secondary market. Primary market is meant for issue of fresh shares and secondary market facilitates buying and selling of second hand securities.

c) Investors: It includes both individual investors and institutional investors such as Mutual funds, banks, Insurance companies etc. It also includes foreign institutional investors.

d) Link between savers and investment opportunities: Capital market is a crucial link between saving and investment process. It facilitates flow of long term capital from those who have surplus capital to those who need capital.

e) Intermediaries: It acts through intermediaries which includes bankers, brokers, underwriters etc.

f) Government rules and regulations: The capital market operates freely but under the guidance of government policies. These market functions within the framework of government rules and regulations.

12. Write five objectives of financial management.                          5

Ans: Objectives of financial management:

Efficient financial management requires existence of some objectives or goals because judgment as to whether or not a financial decision is efficient is to be made in light of some objective. The two main objectives of financial management are:

1) Profit Maximisation: It is traditionally being argued, that the objective of a company is to earn profit, hence the objective of financial management is profit maximisation. Each alternative is to be seen by the finance manager from the view point of profit maximisation. Profit maximization causes the efficient allocation of resources in competitive market condition and profit is considered as the most important measure of firm performance.

2) Wealth maximisation: The second objective of financial management is wealth maximization. The concept of wealth in the context of wealth maximization objective refers to the shareholders’ wealth as reflected by the price of their shares in the share market. Therefore, wealth maximization means maximization of the market price of the equity shares of the company. The objective of wealth maximization implies long-run survival and growth of the firm.

In addition to the above, there are some other objectives of financial management which are stated below:

3. Financial management helps in ensuring the regular supply of funds to the related concern.

4. Financial management ensures the optimum utilization of funds.

5. It helps in investing in safe areas, so that the great R.O.I. can be achieved.

6. Financial management helps in planning a good Financial Structure. There should be maintained a fair balance between the debt and Equity Capital.

Or

Discuss the relationship between planning and controlling.

Ans: The relationship between planning and controlling can be divided into the following two parts.

(i) Interdependence between Planning and Controlling.

(ii) Difference between Planning and Controlling.

(i) Interdependence between Planning and Controlling. Planning is meaningless without controlling and controlling is blind without Planning. Both the aspects of the interdependence of planning and control have been discussed below:

(a) Planning is meaningless without Controlling: if the process of controlling is taken away from management no person working in the enterprise will take it seriously to work according to the plans and consequently, the plans will fail.

(b) Controlling is blind without Planning: Under the system of controlling actual work performance is compared with the standards. Hence, if the standards are not determined there is no justification left for control and the standards are determined under planning.

(ii) Difference between Planning and Controlling: Yes, planning and controlling are incomplete and ineffective without each other but it doesn’t mean that both are not independent. Reasons are:

(a) Planning is looking Ahead whereas Controlling is Looking Back: Plans are always formulated for future and determined the future course of action for the achievement of objectives laid down. On the contrary, controlling is looking back because under it a manager tries to find out, after the work is completed, whether it has been done according to the standards or not.

(b) Planning is the first function and Controlling is the last function of Managerial Process: the managerial process moves in a definite sequence- like planning, organizing, staffing, directing and controlling happens to be the last step.

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ALSO READ (AHSEC ASSAM BOARD CLASS 12)

1. AHSEC CLASS 12 BUSINESS STUDIES CHAPTERWISE NOTES

2. AHSEC CLASS 12 BUSINESS STUDIES QUESTION PAPERS (FROM 2012 TILL DATE)

3. AHSEC CLASS 12 BUSINESS STUDIES SOLVED QUESTION PAPERS (FROM 2012 TILL DATE)

4. AHSEC CLASS 12 BUSINESS STUDIES IMPORTANT QUESTIONS

5. BUSINESS STUDIES MCQs

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13. Discuss the importance of communication in modern business organisation. 5

Ans: Communication is a process of understanding between the persons through exchange of ideas, messages, suggestions etc. It is important due to the following reasons:

a) It facilitates Planning: Participation of all the executives in planning is a pre requisite for getting the task done. This participation is possible only when the managers and employees interact with each other.

b) It helps in decision making. Most of the decisions are taken up by the top level management. But for decision making, right type of information is required from different persons. It is through communication that managers can identify the problems which help in taking the decisions effectively.

c) It helps in the process of motivation: Sharing of the information with the subordinate gains their confidence and willing cooperation. It increases their morale of doing work.

d) It is a basis of effective leadership: A good communicator is a good leader. Through good communication skill, the manager comes closer to his subordinates and removes the misunderstanding. Thus it is the basis of leadership.

e) Helps in smooth working of an enterprise: Smooth working of an enterprise is possible only when there is no communication gap. Through communication managers give directions for smooth functioning of organisation.

14. Write various steps involved in staffing process.                        5

Ans: Steps involved in Staffing Process:

a) Enumerating man power requirement: Staffing process begins with the estimation of man power requirement which means finding out number and type of employees need by the org. in future.

b) Recruitment: After man power planning, the manager tries that more and more people should apply for the job so that the org. can get more choice and select better candidates.

c) Placement and Orientation: Placement refers to placing the right person on the right job for which he is selected. Orientation refers to introducing the new employees with the existing employees.

d) Selection refers to choosing the most suitable candidate to fill the vacant job position. It is a negative process because a number of candidates are rejected under it.

e) Training and Development: The process of training helps to improve the job knowledge and skill of the employees. Training and Development not only motivate the employees but these improve efficiency of work also.

f) Performance Appraisal: At this step the capability of the employees is judged and for that his actual work performance is compared with the work assigned to him. Performance and career planning: It is a process through which employees get better salary, status, position and also get promotion to higher post.

g) Compensation: For deciding the compensation the works are evaluated. Compensation must be reasonable and related with the work.

15. Write five fundamental features of management.    5

Ans: Features of Management:

a) Management is goal oriented: Every management activity is directed towards achieving predetermined objectives of the organisation.

b) Management deals with several functions: Management includes several functions such as planning, organizing, staffing, directing, coordinating, controlling, motivating or actuating, controlling, decision making, leadership and communication.

c) Management is intangible: It cannot be seen but it can be felt through the performance of the workers. Mismanagement if any is quickly noticed and is a sign of poor management.

d) Management is a continuous process: It is a never ending process. It is concerned with constantly identifying the problem and solving them by taking adequate steps. It is an on-going process.

e) Management is dynamic: Under dynamic environment management faces several challenges hence efforts are made to develop and use new techniques for managing the organizations effectively and efficiently.  As social change takes place, management also changes to overcome the problems whenever they arise.

16. Write the economic reforms that have been initiated by Govt. of India since 1991.                   8

Ans: As a part of economic reforms, the Government of India announced a new industrial policy in July 1991. The broad features of this policy were as follows:

a) Privatization and Disinvestment: Privatisation refers to reducing the role of public sector by involving the private sectors in most activities. Due to the policy reforms announced in 1991, the expansion of public sector has literally come to a halt and the private sector registered fast growth in the post liberalised period.  To execute policy of Privatisation government took the following steps:

- Disinvestment of public sector i.e. transfers of public sector enterprise to private sector.

- Setting up of board of industrial and financial reconstruction (BIFR) to revive sick units in public sector.

- Dilution of stake of the government by transferring more than 51% shares to the private sector.

b) Liberalisation of foreign policy: Liberalisation of economy means to free it from direct or physical control imposed by the government.  In other words, it is the process by which government control over the industry is being loosened. It implies liberating the trade and industry from unwanted government control and restriction. Liberalization of the Indian industry has been taken in the following way:

- Abolishing licensing requirements in most of the industries except a short list.

- Freedom in deciding the scale of business activities.

- Freedom in fixing the prices of goods services.

- Removal of restriction on the movement of goods and services.

- Liberalisation in import and export.

c) Globalisation: Globalisation means ‘integrating’ the economy of a country with the world economy.  This implies free flow of goods and services, capital, technology and labour across national boundaries. To achieve these objectives of globalisation, the government has adopted various measures such as:

- Reduction in custom duties.

- Removal of quantitative restrictions or quotas on exports and imports.

- Facilitating foreign investment and encouragement of foreign technology.

- These measures are expected to achieve a higher rate of growth, enlargement of employment potential, and reduction of regional disparities.

Or

Explain the features of an efficient planning process.

Ans. Characteristics of sound plan are:

a) Plan should be simple: for a good plan to be effective, it should be simple, to understand and worked upon different individuals and groups.

b) Plan should be specific: Planning must be goal-oriented. Planning must be linked with certain goals or objectives. A plan starts with the setting of objectives; and then, develops policies, procedures, strategies, etc. to achieve the objectives.

c) Plan must be flexible: conditions under which a business operates keep on changing. Therefore, planning must be flexible and not rigid. It should enable the management to take care of the changes in the environment.

d) Integrated process: Planning is an integrated process. It facilitates and integrates all other functions of management.

e) Selective Process: Planning is a selective process. That is, it involves the selection of the best course of action after a careful analysis of the various alternative courses of action.

f) Formation of premises: Planning requires the formation of premises (i.e., assumptions). It is only on the basis of premises or assumptions regarding the future (i.e., the future political, social and economic environments) that the plans will be ultimately formulated.

g) Involves participation: Planning involves the participation of all the managers as well as the subordinates. In the words of Koontz and O'Donnell, "Plans must be formulated in an atmosphere of close participation and high degree of concurrence".

h) Directed towards efficiency: The main purpose of planning is to increase the efficiency of the enterprise. That means, planning is directed towards efficiency.

17. Discuss various steps involved in the process of organising.                 8

Ans: Steps or Process of Organising

Organization is the process of establishing relationship among the members of the enterprise. The relationships are created in terms of authority and responsibility. To organize is to harmonize, coordinate or arrange in a logical and orderly manner. Each member in the organization is assigned a specific responsibility or duty to perform and is granted the corresponding authority to perform his duty. The managerial function of organising consists in making a rational division of work into groups of activities and tying together the positions representing grouping of activities so as to achieve a rational, well-coordinated and orderly structure for the accomplishment of work. The various steps involved in this process are:

a) Determination of Objectives: It is the first step in building up an organization. Organization is always related to certain objectives. Therefore, it is essential for the management to identify the objectives before starting any activity. Organization structure is built on the basis of the objectives of the enterprise. That means, the structure of the organization can be determined by the management only after knowing the objectives to be accomplished through the organization. This step helps the management not only in framing the organization structure but also in achieving the enterprise objectives with minimum cost and efforts.

b) Enumeration of Objectives: If the members of the group are to pool their efforts effectively, there must be proper division of the major activities. The first step in organising group effort is the division of the total job into essential activities. Each job should be properly classified and grouped. This will enable the people to know what is expected of them as members of the group and will help in avoiding duplication of efforts. For example, the work of an industrial concern may be divided into the following major functions – production, financing, personnel, sales, purchase, etc.

c) Classification of Activities: The next step will be to classify activities according to similarities and common purposes and functions and taking the human and material resources into account. Then, closely related and similar activities are grouped into divisions and departments and the departmental activities are further divided into sections.

d) Assignment of Duties: Here, specific job assignments are made to different subordinates for ensuring a certainty of work performance. Each individual should be given a specific job to do according to his ability and made responsible for that. He should also be given the adequate authority to do the job assigned to him.

e) Delegation of Authority: Since so many individuals work in the same organization, it is the responsibility of management to lay down structure of relationship in the organization. Authority without responsibility is a dangerous thing and similarly responsibility without authority is an empty vessel. Everybody should clearly know to whom he is accountable; corresponding to the responsibility authority is delegated to the subordinates for enabling them to show work performance. This will help in the smooth working of the enterprise by facilitating delegation of responsibility and authority.

Or

Discuss the need and importance of staffing functions of management.

Ans: Staffing is the process of management which is concerned with obtaining and maintaining a satisfactory and satisfied work force. It involves finding the right person for the right job having the right qualification, doing the right job at the right time.

In the words of French Wendell, “Staffing or Human resource management is the recruitment, selection, utilisation and motivation of human resource of the organisation”.

Need and Importance of Staffing:

1. Obtaining competent personnel: Proper staffing helps in discovering and obtaining competent personnel for various jobs.

2. Higher performance: Proper staffing ensures higher performance by putting right person on the right job.

3. Continuous survival and growth: Proper staffing ensures continuous survival and growth of the enterprise, research & development, innovation.

4. Optimum utilization of human resources: Proper staffing helps to ensure optimum utilization of human resources. It prevents underutilisation of personnel and high labour costs. At the same time, it avoids disruption of work.

5. Improve job satisfaction: Proper staffing improves job satisfaction and morale of employee through objective assessment and fair rewarding of their contribution.

18. Explain the rights and responsibilities of a consumer under the Consumer Protection Act.    8

Ans: Rights of Consumers:

a) The right to safety: It refers to the right to be protected against products which are hazardous to health or life.

b) The right to be informed: Consumers have a right to be informed about the quality, quantity and price of goods or services so that they can make the right decision.

c) The right of choice: The consumer has the right to be assured of a choice of various goods and services of satisfactory quality and competitive price.

d) Right to representation (or right to be heard): It is a right and the responsibility of civil society to ensure consumer interest prevails while formulating and executing policies which affect the consumers, as well as right to be heard while developing or producing a product or service.

e) Right to seek redressal of grievances: The consumer has the right go to court against unfair or restrictive trade practices and receives compensation for supply of unsatisfactory goods or services.

f) Others Rights: The right to consumer education, Right to basic needs, Right to healthy environment.

Main responsibilities of consumer are given as under:  

a) Be aware about their right: Consumer must be aware of their own rights.

b) Quality conscious: while making purchase, consumer should look for quality certification.

c) Must obtain cash memo: Consumer must insist on cash memos as cash memo act as proof of purchase.

d) Be Assertive: The consumer must be assertive in his dealings.

e) Be Honest: Consumer must act honestly and choose goods/services, which are legitimate.

Or

Discuss any eight factors that should be taken into consideration while determining working capital requirement.

Ans: Following factors are to be considered before determining the requirement of working capital.

a) Scale of operations: There is a direct link between the scale of business and working capital. Larger business needs more working capital as compared to the small organizations.

b) Nature of Business: The manufacturing organizations are required to purchase raw materials, convert them into finished goods, maintain the stock of raw materials; semi-finished goods and finished goods before they are offered for sale. They have to block their capital for labour cost, material cost etc., so they need more working capital. In the trading firm processing is not performed. Sales are affected immediately after receiving goods for sale. Thus they do no block their capital and so needs less working capital.

c) Credit allowed: If the inventory is sold only for cash, it requires less working capital as money is not blocked in debtors and bills receivable. But due to increased competition, credit is usually allowed. A liberal credit policy results in higher amount of debtors, so needs more working capital.

d) Credit availed: If goods are purchased only for cash, it requires more working capital. Similarly, if credit is received from the creditors, the requirement of working capital decreases.

e) Availability of Raw materials: If the raw materials are easily available in the market and there is no shortage, huge amount need not be blocked in inventories, so it needs less working capital. But if there is shortage of materials, huge inventory is to be maintained leading to larger amount of working capital.

f) Dividend Policies: Dividend policies of a business organisation also influence the requirement of Working Capital. If a business is following a liberal dividend policy, it requires high Working Capital to pay cash dividends where as a firm following a conservative dividend policy will require less amount of Working Capital.

g) Seasonal Variations: In case of seasonal industries like Sugar, Oil mills etc. More Working Capital is required during peak seasons as compared to slack seasons.

h) Business Cycle: Business expands during the period of prosperity and declines during the period of depression. More Working Capital is required during the period of prosperity and less Working Capital is required during the period of depression.

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