Working Capital Definition

Working Capital Definition

Working capital has a very important meaning for a company's operations. In addition, working capital management also has certain objectives to be achieved. Therefore, every company is trying to meet the needs of working capital, in order to increase liquidity.

Then, with working capital fulfilled, the company can also maximize its earnings. Companies in a lack of working capital can endanger the survival of the company concerned, due to not being able to meet the desired liquidity and profit targets. Adequacy of working capital is also one measure of management performance.
DOWNLOAD DISINI In general, the importance of working capital for companies, especially for the financial health of the company that is

1. The activities of a financial manager are more spent in the company's operational activities from time to time. And this is working capital management

2. Investment in current assets is fast and often changes and tends to be volatile. Whereas current assets are the company's working capital, meaning that the change will affect working capital. Therefore, it needs serious attention from the financial manager

3. In practice it is often that half of the total assets are part of current assets, which is the company's working capital. In other words, the total current assets are equal to or more than 50% of the total assets

4. For companies that are relatively small, the function of working capital is very important. Small companies are relatively limited to enter the market with large capital and long term. Funding companies rely more on the short-term end, such as trade debt, one-year bank debt which can certainly affect working capital

5. There is a very close relationship between sales growth and working capital requirements. The increase in sales was related to additions, receivables, inventory, and also cash balances. And vice versa if there is a decline in sales, will affect the components in current assets

Share this post

(adsbygoogle = window.adsbygoogle || []).push({});