Discussion: Managing Working Capital
Oftentimes businesses will fail because their method of managing working capital does not focus on the importance of sustaining working capital and managing the flow of cash through the business. Every new organization needs enough working capital to setup the business, pay operating costs, and continue to operate until payment arrives 30, 60 or maybe even 90 days later. However, if a business uses a lot of their working capital to pay for fixed assets, they may find they cannot pay suppliers, buy materials, or even pay employees' salaries. Discuss the importance of cash on hand and how it affects the strength of the business. Would you agree that the amount of cash on hand is a factor when comparing like businesses?