Need For Working Capital

Apparel Industry Management 3(3+0)

Lesson 20 : Capital Management

Need For Working Capital

The need for working capital to run the day-to-day business activities cannot over emphasized. We will hardly find a business firm, which doesn’t require any amount of working capital. Indeed, firms differ in their requirement of working capital. We known that firm should aimed at maximizing the wealth of its shareholders. In its endeavor to do so, firm should earn sufficient return from its operation. Earning a study amount of profit require successful sales activity. But there is always time gap between the day of sales & its realization from debtors realization from debtors will take time but firm has arrange money for purchase of raw material, to pay for salary, wages and other expenses. Therefore sufficient working capital in needed. The operating cycle can be said to be reason for the need for working capital.

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Last modified: Wednesday, 23 May 2012, 6:15 AM