How can I choose the best working capital strategies?

working capital strategies are plans for future cash flows for business activities. Owners and managers usually plan these strategies for both short -term needs and long -term goals or goals. These plans can also use the extensive use of budgets that help companies control expenses and restrict or disable future situations of negative cash flows. The selection of the best working capital strategies depends on the type of business, working capital cycle, management capabilities and external economic factors. This formula is the current asset minus the current obligation. Current assets and existing obligations are usually used in 12 months or less, which is necessary to measure working capital. Current assets and current obligations include cash and cash equivalents, receivables, supplies, short -term securities and accounts due and short -term loans, respecting. Businesses

usually require different types of working capital strategies. For example, a retainChod stores need strong working capital because they must have enough cash to constantly replenish supplies. Car dealers usually do not have a large amount of working capital because they use floor plan plans to create long -term financing for their vehicles. Companies that need a constant cash flow will try to reduce existing obligations that often require cash pay for current assets rather than a business loan or short -term lines.

working capital cycle helps owners of businesses and managers to determine how well their companies create cash flows, a critical part of working capital strategies, because cash is the most introductory good of current assets. Inventory, receivables and accounts due directly affect working capital. Companies to tramp or have receivables with lower accounts, get longer periods to pay pThe family for goods and services or sell an inventory can improve their cash flow and working capital faster. The opposite occurs if companies are unable to provide benefits from items, resulting in lower working capital.

Economic factors - usually outside the company control - can also affect working capital strategies. Light money policies, unavailable business loans or low consumers' income can focus companies on implementing strategies that keep working capital rather than invest this asset in business. Under these acidic economic conditions, business owners and managers will try to reduce payable accounts and avoid increasing balances on the company's credit line. Avoiding excessive purchase of inventories or selling accounts can also help keep cash and improve their position of working capital. Cash Flow can be more important than generating income during an economic decline.