Discussion
Statement I: Working capital requirements are unusually high in a seasonal plant.
Statement II: A whole year's raw material may have to be bought within a three month season.
In the light of the above statements, choose the correct answer.
Answer: D
Correct answer: Both Statement I and Statement II are correct
Statement II explains statement I. A seasonal plant may have to buy a whole year’s raw material within a three-month season, and then hold the product as stock until it is sold through the year. Both tie up money, which is why working capital in such a plant can rival the fixed investment.
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