What is working capital? Discuss the factors that affects the size of working capital in a tour operation company.

Working capital refers to the capital required for the day-to-day operations of a business. It is the difference between a company's current assets and current liabilities and is used to measure its short-term financial health and operational efficiency. In the tourism industry, particularly in tour operation companies, working capital plays a critical role in ensuring smooth operations, as these businesses often deal with fluctuating demand, seasonal trends, and a diverse range of operational expenses.

For a tour operation company, working capital encompasses components such as:

• Current Assets: Cash, receivables from clients, and prepaid expenses (like bookings for hotels, airlines, and other service providers).
• Current Liabilities: Payables to suppliers, outstanding loans, and other short-term debts.

Having adequate working capital ensures that the company can manage daily operations efficiently, pay suppliers on time, and respond to unforeseen challenges or opportunities.

Factors Affecting the Size of Working Capital in a Tour Operation Company

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