Explain The Importance Of Working Capital

Importance of working capital

Every companionship needs working blogspot.com//search?q=what-is-capital-meaning-features-and">capital to run across its short-term expenses. It keeps the blogspot.com//search?q=what-is-capital-meaning-features-and">business moving. Without it, the trace of piece of occupation concern volition stop, as well as the companionship volition give-up the ghost sick.

Explained below is the importance of working capital.

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1. Continuity inwards Business Operations: Working majuscule keeps the trace of piece of occupation concern operations moving. It is needed to buy raw materials, to pay the workers as well as staff as well as too 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 too used to repay long-term loans as well as debentures. It volition live on impossible to repay debentures, long-term loans as well as other long-term liabilities without it.
4. Increases Creditworthiness: Influenza A virus subtype H5N1 companionship that pays its creditors good on fourth dimension has a positive reputation inwards the credit blogspot.com//search?q=what-is-capital-meaning-features-and">market. Such a goodwill helps a companionship to larn raw materials on credit. It tin strength out too larn loans as well as advances from the banks. The dealers are too willing to give 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 companionship that faces no working majuscule problems provides meliorate working weather as well as welfare facilities to its workers. It too tin strength out maintain its machines inwards expert conditions. It tin strength out 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 companionship to handle its competitors. It tin strength out live on used to blogspot.com//search?q=what-is-capital-meaning-features-and">advertise as well as to produce sales promotion. The companionship tin strength out too afford to give longer credit price to the customers.
7. Helps to Withstand Seasonal Fluctuations: Working majuscule is required throughout the year. But the sales may live on seasonal inwards 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 payoff to workers as well as to run across other expenses. So, it helps the companionship to withstand seasonal fluctuations.
8. Increases Goodwill: The companionship that meets the needs of its working majuscule without whatever difficulty earns a expert reputation inwards the blogspot.com//search?q=what-is-capital-meaning-features-and">labour as well as majuscule markets. It is so, since, the companionship pays payoff as well as salaries to the employees as well as the suppliers of raw materials, etc., inwards time. Thus, it too 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.