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Why it is important to manage working capital? Note: you will receive one mark for each...

Why it is important to manage working capital?
Note: you will receive one mark for each well - explained point.

Business   Accounting   
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Answer #1

---> Working capital is a signal of a Company's operating Liquidity.

Having enough working capital means that the company should be able to pay for its all short term short term expenses and liabilites.

---> Working capital is a measure of liquidity and thus is a measure of their future credit worthiness.

---> It is important for small companies that cannot access financial markets to borrow, and for statups that need to survive untill they breakeven.

---> Working capital cannot gurantee whether a company is financially sound, but it gives insight.

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