Explain The Importance Of Working Capital

Importance of working capital

Every fellowship needs working blogspot.com//search?q=what-is-capital-meaning-features-and">capital to encounter its short-term expenses. It keeps the blogspot.com//search?q=what-is-capital-meaning-features-and">business moving. Without it, the describe of piece of job organization volition stop, as well as the fellowship volition transcend away sick.

Explained below is the importance of working capital.

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1. Continuity inward Business Operations: Working majuscule keeps the describe of piece of job organization operations moving. It is needed to buy raw materials, to pay the workers as well as staff as well as besides to pay the recurring expenses similar electricity as well as ability bills, rent, etc.
2. Dividend Payment: Working majuscule 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 majuscule is besides used to repay long-term loans as well as debentures. It volition last impossible to repay debentures, long-term loans as well as 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 inward the credit blogspot.com//search?q=what-is-capital-meaning-features-and">market.

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   Such a goodwill helps a fellowship to larn raw materials on credit. It tin besides larn loans as well as advances from the banks. The dealers are besides willing to reach blogspot.com//search?q=what-is-capital-meaning-features-and">money to the such a company. Hence, working majuscule increases company's creditworthiness.
5. Boosts Efficiency as well as Productivity: The fellowship that faces no working majuscule problems provides meliorate working weather as well as welfare facilities to its workers. It besides tin maintain its machines inward skilful conditions. It tin afford to pass coin for preparation as well as evolution of its workers. All such steps boost the efficiency as well as productivity of the company.
6. Helps to Fight Competition: Working majuscule helps the fellowship to larn by its competitors. It tin last used to blogspot.com//search?q=what-is-capital-meaning-features-and">advertise as well as to create sales promotion. The fellowship tin besides afford to reach longer credit price to the customers.
7. Helps to Withstand Seasonal Fluctuations: Working majuscule is required throughout the year. But the sales may last seasonal inward nature. If the sales are down, the coin inflow is less. Therefore, liquid blogspot.com//search?q=what-is-capital-meaning-features-and">cash is required, to pay reward to workers as well as to encounter other expenses. So, it helps the fellowship to withstand seasonal fluctuations.
8. Increases Goodwill: The fellowship that meets the needs of its working majuscule without whatever difficulty earns a skilful reputation inward the blogspot.com//search?q=what-is-capital-meaning-features-and">labour as well as majuscule markets. It is so, since, the fellowship pays reward as well as salaries to the employees as well as the suppliers of raw materials, etc., inward time. Thus, it besides helps to increment the goodwill of the company.

The related article on this topic:

1. blogspot.com//search?q=what-is-capital-meaning-features-and">Importance of fixed capital.