Title: How Working Capital Works
Headings: How Working Capital Works
How Working Capital Works
Key Takeaways
What Is Working Capital?
Not All Companies Are the Same
Evaluating Companies
The Bottom Line

Content: The better a company manages its working capital, the less it needs to borrow. Even companies with cash surpluses need to manage working capital to ensure that those surpluses are invested in ways that will generate suitable returns for investors. Not All Companies Are the Same
Some companies are inherently better placed than others. Insurance companies, for instance, receive premium payments upfront before having to make any payments; however, insurance companies do have unpredictable cash outflows as claims come in. Normally, a big retailer like Walmart ( WMT) has little to worry about when it comes to accounts receivable: customers pay for goods on the spot. Inventories represent the biggest problem for retailers; as such, they must perform rigorous inventory forecasting or they risk being out of business in a short time. Timing and lumpiness of payments can pose serious troubles.