Explain The Importance Of Working Capital

Importance of working capital

Every fellowship needs working capital to run across its short-term expenses. It keeps the business moving. Without it, the concern volition stop, together with the fellowship volition croak sick.

Explained below is the importance of working capital.

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1. Continuity inwards Business Operations: Working upper-case alphabetic lineament keeps the concern operations moving. It is needed to buy raw materials, to pay the workers together with staff together with likewise to pay the recurring expenses similar electricity together with ability bills, rent, etc.
2. Dividend Payment: Working upper-case alphabetic lineament is needed to pay a dividend to the shareholders. The payment of dividend takes house on a yearly or half-yearly basis.
3. Repayment of Long-Term Loans: Working upper-case alphabetic lineament is likewise used to repay long-term loans together with debentures. It volition last impossible to repay debentures, long-term loans together with other long-term liabilities without it.
4. Increases Creditworthiness: Influenza A virus subtype H5N1 fellowship that pays its creditors good on fourth dimension has a positive reputation inwards the credit market. Such a goodwill helps a fellowship to larn raw materials on credit. It tin likewise larn loans together with advances from the banks. The dealers are likewise willing to hand money to the such a company. Hence, working upper-case alphabetic lineament increases company's creditworthiness.
5. Boosts Efficiency together with Productivity: The fellowship that faces no working upper-case alphabetic lineament problems provides meliorate working weather condition together with welfare facilities to its workers. It likewise tin maintain its machines inwards proficient conditions. It tin afford to pass coin for grooming together with evolution of its workers. All such steps boost the efficiency together with productivity of the company.
6. Helps to Fight Competition: Working upper-case alphabetic lineament helps the fellowship to struggle its competitors. It tin last used to advertise together with to create sales promotion. The fellowship tin likewise afford to hand longer credit damage to the customers.
7. Helps to Withstand Seasonal Fluctuations: Working upper-case alphabetic lineament is required throughout the year. But the sales may last seasonal inwards nature. If the sales are down, the coin inflow is less. Therefore, liquid cash is required, to pay reward to workers together with to run across other expenses. So, it helps the fellowship to withstand seasonal fluctuations.
8. Increases Goodwill: The fellowship that meets the needs of its working upper-case alphabetic lineament without whatsoever difficulty earns a proficient reputation inwards the labour together with upper-case alphabetic lineament markets. It is so, since, the fellowship pays reward together with salaries to the employees together with the suppliers of raw materials, etc., inwards time. Thus, it likewise helps to increment the goodwill of the company.

The related article on this topic:

1. Importance of fixed capital.