Importance Of Working Capital

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Financial Management Name: I.D.: Financial Management Contents 1. Introduction 2. Working Capital concept 3. Importance of working capital 4. Components of working capital 5. Management working capital Introduction This paper will discuss the working capital in the following terms: Working Capital concept, Importance of working capital, Components of working capital, Management working capital. The researcher will define, analysis and provide examples to the terms 1. Working Capital concept The concept of gross working capital refers to the total value of current assets. In other words, gross working capital is the total amount available for financing of current assets. However, it does not…show more content…
Controlling the fund liquidities etc. 2. Importance of working capital Working capital is a vital part of a business and can provide the following advantages to a business: a. Investment is looking high return of his money in the business and there are many ratios regarding this analysis b. Working capital shows the return on the short term liabilities of the business and expenses of the business c. Financial statement principle has classified the current assets from cash, account receivables, inventories and this classification protect the business from most cash to less liquidities d. Business is more efficient with grate working capital e. Business has good relation in the working capital and in the financing terms and with good discount payment and methods of the inventories for suppliers f. Scale of the working capital shows in the following as good example: Cash …> Inventories…..> sales……> Collections …> Cash g. There are many rations assesses the working capital and benefit the business power in the…show more content…
Components of working capital There are four components of working capital as following 1. cash, 2. marketable securities, 3. receivables and 4. inventory The first of this component is the cash. It is important for the business. The meaning of cash is any currency, accepts by any one and issued by low of the country. It is also need to bay all the expenses of the business; salaries, water expenses, internet expenses, electrics etc. also purchases fix cost and car machines etc, the accounting entry is: No Accounts Debit Credit Cash Capital xxxxx xxxx Total xxxxx
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