Managing Working Capital in Organizations
Define working capital. What could happen if an organization neglected to manage its working capital? What techniques would you recommend for your organization in order to appropriately manage their working capital? Why?
“ Working capital is defined as the difference between current assets and current liabilities” (SBA, 2013). It’s the total amount of cash or inventory that can quickly be converted into cash or assets in order to grow an organization. Working capital is calculated by subtracting all the years liabilities from the total current assets. It’s what’s leftover to invest. Having to much working capital is never necessarily a bad thing in todays market. Typically the books say having to much working capital means that your not properly investing your money. Try telling this to the people that lost millions due to the financial collapse a few years back.
Organizations must manage their working capital to ensure a smooth flow of business operations. There must be funding or credit to order new products, services, raw materials, ect.. Neglecting working capital can lead to an organizations collapse.
My organization must manage their working capital accordingly in order to remain competitive. We often require particular skill set positions that require long term investments in people. Managing working capital is extremely important because employees get paid every pay cycle. You want to make sure your checks do not bounce. You must ensure your updating operating systems while employing industry leaders.
Reference: U.S. Small Business Administration. (2013). Credit Factors: Working Capital. Retrieved from http://www.sba.gov/content/working-capital
2. What is capital planning? Why is the internal rate of return important to an organization? Why is net present value important to a project? What methods would you use to select from multiple projects presented to your organization?
Capital planning or also known as capital budgeting is
“ Working capital is defined as the difference between current assets and current liabilities” (SBA, 2013). It’s the total amount of cash or inventory that can quickly be converted into cash or assets in order to grow an organization. Working capital is calculated by subtracting all the years liabilities from the total current assets. It’s what’s leftover to invest. Having to much working capital is never necessarily a bad thing in todays market. Typically the books say having to much working capital means that your not properly investing your money. Try telling this to the people that lost millions due to the financial collapse a few years back.
Organizations must manage their working capital to ensure a smooth flow of business operations. There must be funding or credit to order new products, services, raw materials, ect.. Neglecting working capital can lead to an organizations collapse.
My organization must manage their working capital accordingly in order to remain competitive. We often require particular skill set positions that require long term investments in people. Managing working capital is extremely important because employees get paid every pay cycle. You want to make sure your checks do not bounce. You must ensure your updating operating systems while employing industry leaders.
Reference: U.S. Small Business Administration. (2013). Credit Factors: Working Capital. Retrieved from http://www.sba.gov/content/working-capital
2. What is capital planning? Why is the internal rate of return important to an organization? Why is net present value important to a project? What methods would you use to select from multiple projects presented to your organization?
Capital planning or also known as capital budgeting is