A business man who wants to start a manufacturing concern approaches you to suggest him whether following manufacturing concerns would require large or small working capital:
(i) Bread
(ii) Sugar
(iii) Coolers
(iv) Furniture manufacturing against specific orders; and
(v) Motor car
Give your view point with reasons in each of the above cases.
(i) Bread: A small amount of working capital is needed as the product is sold for cash or at very short credit and have a quick cash turnover
(ii) Sugar: A large amount of working capital is needed because the ratio of raw material of the total cost is quite high and the raw materials availability is seasonal.
(iii) Coolers: It is a seasonal product. Therefore, it requires large amount of working capital to store the output during the non-seasonal period.
(iv) Furniture manufacturing against specific order: It requires small working capital as it is quickly converted into cash sales and many times advance from customers is also available.
(v) Motor car: A large amount of working capital is required because the gestation period is long.