Businesses must maintain a certain amount of money to enable them to carry day-to-day operations. They must ensure finances are at an optimum level to enable their operations run successfully. Therefore, if an enterprise has adequate cash flow it is able to carry their activities economically and without financial constraints. It enables companies to face losses and unforeseen circumstances. The following are the advantages of maintaining optimum working capital.
It improves credit profile and solvency of an enterprise. When a business can meet short-term obligations, it can also meet long-term ones and thus can prove to be solvent. When businesses manage their liquidities, it allows them to pay their short-term obligations. This is a good indication that its credit profile is good. Suppliers will be paid on time to allow a continuous supply of materials which increases production.
When there is a continuous supply of raw materials, it means that production is also continuous. This is attributed to the ability of the business to meet their obligations to suppliers. When there is the production of goods, it increases sales turnover which increases cash at hand. The cash is then used to generate extra income which then translates to increased profits. Therefore, if firms can manage their account receivables and payables it leads to generation of profits.
When a business can able to maintain cash outflow and inflows, good will is created. This is achieved when business is solvent enough, it means that they can meet their obligations on time. Suppliers are able to supply continuously and receive their payments on time. Therefore, business will not run short of stock which means sales are going up. Also, it must ensure that debts are made on time to enable the business is running its operations.
Firms who are able to manage their liquid money are able to produce their goods in large quantities. When the goods are enough is satisfies their customer needs which may lead to increases in their supply chain. When customers buy goods quantities, the firm can offer discount and low prices for those who buy in bulk. With this strategy, firms can get access to large market and take advantage of the competitive market.
Also, firms will enjoy uninterrupted production of goods. When suppliers are paid on time, they will be in a position to supply raw materials continuously. This will ensure that the production of goods remains constant which leads to an increase in sales because customers are receiving their goods on time. This leads to increases in sales which leads to increases in profits.
Businesses that are unable to manage their cash flows might misuse a lot of money and other resources. If the executive finds that funds are not properly used, it is highlighted as misappropriations and can lead to business failure. When business utilizes their funds efficiently it increases employee morale and efficiency which leads to the generation of high income.
Firms must maintain good cash flow to work efficiently. It allows for efficient supply chain and can produce in large quantities. This attracts a high number of customers which the firm can offer discount hence enjoying a competitive advantage. Good management of finances enables the firm to enjoy a variety of services.
It improves credit profile and solvency of an enterprise. When a business can meet short-term obligations, it can also meet long-term ones and thus can prove to be solvent. When businesses manage their liquidities, it allows them to pay their short-term obligations. This is a good indication that its credit profile is good. Suppliers will be paid on time to allow a continuous supply of materials which increases production.
When there is a continuous supply of raw materials, it means that production is also continuous. This is attributed to the ability of the business to meet their obligations to suppliers. When there is the production of goods, it increases sales turnover which increases cash at hand. The cash is then used to generate extra income which then translates to increased profits. Therefore, if firms can manage their account receivables and payables it leads to generation of profits.
When a business can able to maintain cash outflow and inflows, good will is created. This is achieved when business is solvent enough, it means that they can meet their obligations on time. Suppliers are able to supply continuously and receive their payments on time. Therefore, business will not run short of stock which means sales are going up. Also, it must ensure that debts are made on time to enable the business is running its operations.
Firms who are able to manage their liquid money are able to produce their goods in large quantities. When the goods are enough is satisfies their customer needs which may lead to increases in their supply chain. When customers buy goods quantities, the firm can offer discount and low prices for those who buy in bulk. With this strategy, firms can get access to large market and take advantage of the competitive market.
Also, firms will enjoy uninterrupted production of goods. When suppliers are paid on time, they will be in a position to supply raw materials continuously. This will ensure that the production of goods remains constant which leads to an increase in sales because customers are receiving their goods on time. This leads to increases in sales which leads to increases in profits.
Businesses that are unable to manage their cash flows might misuse a lot of money and other resources. If the executive finds that funds are not properly used, it is highlighted as misappropriations and can lead to business failure. When business utilizes their funds efficiently it increases employee morale and efficiency which leads to the generation of high income.
Firms must maintain good cash flow to work efficiently. It allows for efficient supply chain and can produce in large quantities. This attracts a high number of customers which the firm can offer discount hence enjoying a competitive advantage. Good management of finances enables the firm to enjoy a variety of services.
About the Author:
When you are looking for information about working capital, come to our web pages today. More details are available at http://www.americandirectfunding.com/working-capital now.
No comments:
Post a Comment