Question

How are customers and suppliers affected by a firm’s working capital management decisions?

Answer 1

Working Capital:

Working capital is computed as the difference between the current assets and current liabilities. It is the capital that is used to run the daily operations in a business. Working capital must be properly managed to ensure that the business has the cash flows it requires to run operations.

Answer and Explanation:

Working capital management ensures that the company operates optimally in both the current asset and current liabilities. This helps the business to be able to service the financial obligations as and when they fall due and also boost the earnings.

If the firms working capital is managed properly, the suppliers will be paid in good time without delay, and the customers will always get the supply of the product as inventory is well managed.

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