Holicent
VIP Contributor
Working capital management is the discipline of using working capital to manage your company's liquidity. Working capital is money or assets on hand that can be used to generate cash. It includes cash, short-term investments, accounts receivable (money owed), inventories and prepaid expenses. Working capital management is an important part of running a business. If you don't have enough working capital available to make your payments, you may not be able to pay your bills on time or at all. That could lead to financial problems such as bankruptcy or repossession of assets like vehicles or machinery.
A company's working capital is often measured in terms of the average daily balance in its accounts receivable and inventory accounts. The average daily balance is the sum of all amounts owed to the company by customers on their invoices and the amount of products held in inventory at any one time. When a business has a high level of working capital, it means that it can afford to spend money on new projects while also paying off old debts. This means that a company can meet its obligations without having to borrow money or sell assets.
A company's working capital is often measured in terms of the average daily balance in its accounts receivable and inventory accounts. The average daily balance is the sum of all amounts owed to the company by customers on their invoices and the amount of products held in inventory at any one time. When a business has a high level of working capital, it means that it can afford to spend money on new projects while also paying off old debts. This means that a company can meet its obligations without having to borrow money or sell assets.
