Working Capital: The Life Blood Of Business

1123 words - 5 pages

Working capital is the most important of all the financial concepts a business owner should understand. By definition, it is the money needed to sustain the day-to-day operations of a business (Staff, 2013). When you first start a business, you will be required to have a sufficient working capital in order to keep the business running smoothly. Conversely, lack of working capital may cause businesses to fail. Working capital can come from net income, long-term loans, sale of capital assets and fund contributed by investors, but many business owners use their personal financial resources to fund their businesses. Working capital also gives confidence on a business. Having sufficient of it ...view middle of the document...

No businesses can be successful without adequate working capital. It is true that it is what the business keeps running because it strengthens the solvency. Also, the readers gained knowledge about different ways to improve the working capital. However, there are details that need to have further reading.

Upon reading the article, I learned more about working capital. Working capital is the nerve center of a business. It is very essential in running the business. I also found out the importance of working capital. Block (2005) stated that lack of working capital will cripple your business; therefore, it should be properly managed for it will help you to grow your business. Another thing I learned from the articles is the different ways of improving working capital. According to Bartram (2013), ways to improve working capital includes managing working capital actively, considering alternative funding, paying suppliers on time, negotiating discounts with suppliers, making expenses more visible, managing your stocks, managing the payment process and lastly, investigating the benefits of electronic procurement. One more thing I learned is the working capital need. In order to manage the cash flow effectively, you should know how to determine the needs of working capital. One useful tool in determining the working capital needs is analyzing the business operating cycle (Staff, 2013). Moreover, Staff (2013) gives the most common sources in financing working capital. These are equity, trade creditors, factoring, line of credit, and short-term loan. In addition, I learned about working capital problem in small and medium scale business. Block (2005) said that many small business especially those that are seasonal are experiencing financial problems. However, he stated that seasonality problem is not only exclusive to small businesses. Block (2005) suggests having a flexible planning in order to overcome seasonal working capital problems.

Though, the article gives much information there are still details that need further research. In the article of Block (2005), he mentioned that seasonality is one of the causes of working capital problems. I think what is missing in the article are the tips on how to run a seasonal business year round. Also, the question to what extent does seasonality affects small businesses is missing. Bartram (2013) gives limited ways on how to increase the business working capital. I am sure that there are additional ways to improve working...

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