Significance of Working Capital

Significance of Working Capital:

Some time, when creditors demand their money from company, at this time period company's high working capital saves company from this condition. You know that selling of current assets is simple in small period of time however Company can’t sell their fixed assets within small time period. Therefore, when company has adequate working capital, Company can simply pay off the creditors and make his reputation in market. However if a company has zero working capital and then company can’t pay creditors in emergency time and either company becomes bankrupt or takes loan at very high rate of Interest. In both situation, it is very risky and always Company's Account Manager tries to keep a few amount of working capital for making goodwill in market.

Positive working capital allows also paying day to day expenditures such as wages, salaries, overheads and other operating expenditures. Since sufficient working capital can’t only pay maturity liabilities however also outstanding liabilities devoid of any more delay.

One of the benefits of positive working capital that Company can do every risky work devoid of any tension of self security.

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