a manufacturer of seats for use in commercial airliners, with a work in progress time of no more than one week. In this example, for this rea son alone, the airframe manufacturer would require far more working capital (there are, of course, several other critical factors involved, such as average cost per unit, average order size, and so forth).
When the commercial characteristics of an industry are considered, different factors influence the level of required working capital. Of critical significance in this context are (1) the relationship between the amount of output sold for cash and that sold on credit, and (2) the terms of credit extended. Thus, the amount of working capital required for a McDonald's Restaurant (where all sales are for cash) will be proportion ately far less than that required for the typical fine jewelery store (where significant proportions of most sales are charge
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