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Managing Working Capital Final Essay

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Managing Working Capital Final Essay
Managing Working Capital
Maeli Cawich
Lisandro Vasquez
Corozal Junior College
1

Managing Working Capital
There are three main types of Capital. It includes the Working Capital in which we will be elaborating further in this essay, Investment Capital and Venture Capital. Investment Capital also known as Fixed Capital, is permanent capital invested in an organization which is used to purchase fixed assets that will be used over many years and will generate more money. Venture Capital is risk capital invested into a business. It is also known as risky capital that investors will provide in a business to develop, expand or diversify new market lines and products. The textbook Principles of Business by BMC Abiraj defines Working Capital as “the day-to-day finance needed for running a business.” (Abiraj, Principles of Business, 2006) This type of capital is needed in every business, not for the purchases of fixed assets, but rather to pay bills for raw materials and other components, wages, rent and supplies among others needed circulating materials. Working capital can also be referred as circulating capital that helps the daily work or operations of a business. Working capital is also referred to capital which changes in the course of production. The purpose of this essay is to point out the general information about managing working capital which includes advantages and disadvantages of working capital among other features or characteristics. Firstly, the formula to calculate working capital is to subtract the total of current liabilities from the total of current assets. (Abiraj, Principles of Business, 2006) If a business has little of working capital, then the organization is in danger of being illiquid and can lead a business not to pay its essential bills. With this concept of working capital that exists with the actual cash that a company uses to operate and finance organization overall, comes the term of managing working capital or working


References: Abiraj, B. (2006). Principles of Business (Vol. Fifth Edition). Hachette Livre, UK: Hodder Education. Borad, S. (23 April, 2014). Positive Working Capital. Retrieved from eFinanceManagement: http://www.efinancemanagement.com/working-capital-financing/positive-working-capital-its-advantages-and-disadvantages INVESTOPEDIA, L. (Copyright 2015). Working Capital Management. Retrieved from INVESTOPEDIA: http://www.investopedia.com/terms/w/workingcapitalmanagement.asp
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