What is the Importance of Working Capital?

Here are the top 8 reasons why working capital is important –

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#1 – Liquidity Management

#2 – Out of Cash

Inappropriate management of day to day expenses may result in enterprise liquidityLiquidityLiquidity is the ease of converting assets or securities into cash.read more issues. Therefore, the planned management of working capital can avoid such a situation.

#3 – Helps in Decision Making

#4 – Addition in the Value of Business

Proper working capital management results in timely payment to the lenders, which creates goodwill in the market.

#5 – Helps in the Situation of Cash Crunches

#6 – Perfect Investments Plans

Correctly managing the funds or working capital, the company can plan for their investments accordingly and maximize its return.

#7 – Helps in Earning Short Term Profits

#8 – Strengthening the Work Culture of the Entity

Timely payment of all day to day expenses like the salary of the employees creates a good environment and motivates employees to work harder.

This has been a guide to the Importance of Working Capital. Here we discuss the top 8 reasons including liquidity management, out of cash, helps in decision making, perfect investment plans and helps in earning short term profits, etc. You can learn more about from the following articles –

  • Adjusted Working CapitalComponents of Working CapitalGross Working CapitalNegative Working Capital