Title: Working Capital Management Importance | Top 4 Reasons
Headings: Working Capital Management Importance
Working Capital Management Importance
Why is Working Capital Management Important?
Top Reasons for Working Capital Management
#1 – Improvement in the Credit Profile and Solvency of the Company
Example
#2 – Use of Fixed Assets Efficiently
Example
#3 – Ability to Face Crises
Example
#4 – Expansion
Example
Conclusion
Recommended Articles

Content: Once the company has a high credit score, then it will also qualify for the business loan at a lower rate, making it easier for the company to procure finances easily in the future and leading the business in good financial standing. #2 – Use of Fixed Assets Efficiently
Proper management of the working capital and availability of adequate working capital all the time will enable the company to effectively and efficiently use the fixed assets present. In case because of the unavailability or paucity of working capital, the fixed assets of the company remains idle then in that case also the depreciation has to be charged, and the interest on capital borrowed is to be paid on fixed assets, i.e., the company has to incur the fixed expenses on the fixed assets unnecessarily even though it is not using it. So, with the help of working capital management, fixed assets can also be managed and used in an effective manner. Example
There is a company ABC ltd which is manufacturing and selling the pens in the market. In the last month, it purchased the assets for increasing productivity and sales by borrowing the money from the market. The company, however, didn’t look into its working capital position. So even after purchasing the fixed assets, due to a lack of working capital, the company is unable to utilize its fixed assets properly to increase its production. Also, the company has to incur the depreciation charges and interest on the borrowed capital unnecessarily even though it is not using the fixed assets. If the company had managed the working capital properly, then this situation would not have arrived.