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Q.

What is the importance of working capital as it relates to corporate strategic planning process?

Tags: careers, computers & internet, working capital
Asked by anantharaman, 14 Dec '12 10:00 am
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Answers (7)

 
1.

Working Capital is a measure of how much your current assets (i.e., assets that can or will be liquidated into cash within the next 12 months) exceed or are exceeded by you current liabilities (obligations that require settling within the next 12 months). By itself, working capital is not especially useful for strategic planning purposes, however, when combined with detailed cash inflow and outflow projections, this will tell a Company's business planning department how much of their funds over the next 12 months will be required to pay down their short-term obligations or how much additional funds can come from the liquidation of their short-term assets, and then use this information to project how to spend their overall funds.
Answered by Rocking Raaj, 14 Dec '12 10:04 am

 
  
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2.

Working capital is very important concept in finance.
Working capital represents the funds available with the company for day to day operations. working capital finances the cash conversion cycle. company cannot survive with negative working capital which represents that the company has no funds for day to day operations
Essentially working capital is the answer to the question: "How much short term funding do you need to operate this business?". Short term funding is important because, with long term funding already in place, the business still needs short term funding to operate. Without the short term funding, the business will go bankrupt.

Another concept is net working capital which means surpuls of current assets over current liablities. a positive NWC is good for a company
Answered by saranathan Narasimhan, 14 Dec '12 03:59 pm

 
  
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3.

A)Generally , a company spends most of its total working capital funds on acquiring fixed assets and a part of it , working capital, towards financing a part of the components in working capital cycle. The balance for financing the working capital cycle comes from bank's working capital loan.Rarely we find companies having entire money to run the business coming from its tangible net worth, especially in the cases of small and medium sized business units.

b)It is easier to get working capital loan from a bank if the plant is ready , the debt(long term debt )/equity is fine and the projected current ratio(current liabilities/current assets) is satisfactory.

c)Adequate working capital loan along with the company's margin to match the working capital assets (stocks, receivables etc) would enable it to have sufficient cushion to meet contingencies and emergencies eg delay in collecting receivables, procurement of additional raw materials urgently etc.

d)A good current ratio (C ...more
Answered by Guest, 14 Dec '12 11:43 am

 
  
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4.

Working Capital is the key for the day to day needs to operate the business successfully-Apart from Raw material,consumbales, fixed costs like salary and to pay all taxes and duties electricity /fuel bills and the other sundry expenses and other stuff the and like meeting the sundry expenses,local conveyance transportation cost of the goods and so kinds-So WC is a must to run the business
Answered by Quest, 14 Dec '12 10:24 am

 
  
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5.

Working Capital is the fund kept ready to cater to the need of the Organisation to face the day to day business necessities like fulfilling emergency work order....business promotion, raising of rare raw materials, etc... Itz the business necessity....
Answered by Pradipta pati, 14 Dec '12 10:19 am

 
  
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6.

Working Capital is the key for the day to day needs to operate the business successfully-Apart from Raw material,consumbales, fixed costs like salary and to pay all taxes and duties electricity /fuel bills and the other sundry expenses and other stuff the and like meeting the sundry expenses,local conveyance transportation cost of the goods and so kinds-So WC is a must to run the business
Answered by MsRachanaMenon, 14 Dec '12 10:05 am

 
  
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