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Working capital is where a company’s capital needs to hold its current assets. Raw material, semi-finished goods, prepaid expenses, cash in hand, accounts receivables, and debtors are examples of working capital. The company is obliged to have cash payments for different expenses like rent and advertising. All of the company’s finances are changed into cash after investing its finances into current assets. After the conversion, the cash flows out in order to switch for other current assets. There are two concepts of working capital which include gross and net working capital. Gross working capital determines the company’s total current assets. Net working capital determines the company’s difference between its current assets and current liabilities (“Working Capital: Meaning, Concepts and Diagrams,” n.d).Working capital is essential to Genesis Energy because the company would have a bad performance and evaluation when it comes to evaluating the company’s growth prospective. Working capital can help prevent the company from spending money on added costs or expenses.
Short-term financing assists companies in handling its current assets and current liabilities. It can be done in order to see if there is stability between the company’s profits and probability in impacting the company’s worth. Secured loans would be one way to help Genesis deal with its short-term requirement. Secured loans promote low interest rate and help the company sells its AR. This method will help the Genesis generate some revenue.
Working capital acts for the assets needed to carry out day-to-day operations. This is done by making sure that the company’s working capital has reliable liquidity for short-term financing requirements. Also, it helps raise the company’s income. Capital investment, increasing equity, and making loans are a few ways to make cash.