Working Capital for Business

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Working Capital for Business
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Working capital is the cash-on-hand available to
a business for day to day operations. A retail
grocery store may need cash on hand to pay
vendors that require payment on delivery. A
clothing boutique may need funds to pay for
buyers to go to various fashion events to
determine what to buy for the coming season and
an auto mechanic needs money to purchase parts
and supplies to complete car repairs.
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Working capital for business is usually tied to
the inventory levels of the company, accounts
receivable and accounts payable. 
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Working capital for business pertains to the cash
utilized for the operational needs of the
business.
Working capital for business is also referred to
as current capital. 
Working capital for business is also referred to
as current capital. 
The cash used as working capital for business is
needed by the company to be able to pay for its
day-to-day expenses or short-term obligations.
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Working capital for business is usually tied to
the inventory levels of the company, accounts
receivable and accounts payable.
If the business sells its entire existing
inventory then they may make a nice profit. This
means they have enough working capital for
business to be able to buy new raw materials and
produce finished goods.
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Understanding Working Capital Cycle
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Why you need cash
Working capital cycle is used to illustrate the
length of days it takes a business to convert its
inventories into cash.
Why you need to buy raw materials 
 If you are into manufacturing, you buy raw
materials from suppliers, work on them and make
it ready for customers to buy. 
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Customers will either buy in cash or on credit.
Then you collect money back from your customers.
You must understand the effect of selling on
credit to customers.
The longer you hold stock, and the longer it
takes you to collect cash from credit sales made
to your customers, the greater cash flow
difficulties you will face.
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In terms of finding a few tips on how to manage
your working capital, there are three objectives
to consider. The objectives include having enough
cash to make necessary payments when due, making
sure the money does not cost more due to interest
on a loan or overdraft protection policy, and
planning for increase cash flow needs in the
future.
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Debtors

• Customers who buy from you on credit, even
  moderate credit terms like 30 days, have your
  company's working capital health in their hands.
  If they do not pay on time, your cash flow can be
  seriously dented.

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Creditors

• Just as you should not overload your household
  with more debt than your income can support, your
  business's creditors should be kept to a minimum
  both in number and accrued balances. When
  possible, take advantage of early payment
  discounts or pay cash to avoid interest.

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Inventory

• Carrying high levels of inventory when it is in
  demand is good for business as well as revenues.
  However, carrying a lot of inventory when demand
  is low hurts your cash on hand. When cash is tied
  up in inventory, sales must increase in order to
  rebuild cash levels. 

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Emailinfo_at_midwestcorporatecredit.comPhone(844)
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Ave STE E2Oakbrook Terrace, IL 60181
http//midwestcorporatecredit.com/working-capital-
for-business/
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