- KredX Editorial Team
- 30 Oct 20
- business,Working Capital

Fundamentally, working capital is the difference between a firm’s current assets and current liabilities. A company with sufficient working capital possesses a strong financial standing. Regardless, to ensure the same, businesses are required to adopt effective working capital management strategies and put them into practice.
Ideally, a business should be considerate about the internal as well as the external determinants of working capital while framing such strategies. Read to become familiar with the concept and significance of managing your working capital.
What Is Working Capital Management?
Working capital management is usually described as an accounting strategy that tends to focus on maintaining an adequate balance between a firm’s current assets and current liabilities. Managing working capital signifies proper handling of cash, inventory, accounts receivables, and accounts payables. Generally, entrepreneurs use key performance ratios like - working capital ratio, turnover ratio, and collection ratio to facilitate efficient management of working capital. Such financial metrics allow users to identify areas that require more effort to maintain profitability and liquidity.Role Of Responsible Working Capital Management
A business firm can face issues like - bankruptcy, asset liquidation, and legal problems when it fails to cover for its financial obligations. These make it more important for you to manage your firm’s working capital responsibly. In general, the primary objective of responsible working capital management is to meet financial liabilities smoothly and accelerate your operational revenue. These pointers elucidate how managing operating capital can help your firm.-
Improves Credit Profile And Solvency
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Efficient Use Of Fixed Assets
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Helps Navigate Financial Crisis
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Facilitates Expansion