I learned that working capital is a very important part of any business because it is essential for the growth of the company. Working capital is needed for daily operation on the company because it is used to pay bills, and pay employees. It a company neglects to manage it working capital it will put the company in a position of financial difficult that could result in a company filling bankruptcy or closing the business. This is because if the working capital is depleted or low, it prevents the company from purchasing more products to sell to help generate revenue.
Also when capital is low the company risks low liquidity which could cause the company problems paying their bills and meeting payroll responsibilities. This in turns causes the company to be delinquent in paying bills and make loan payments. This just cause more financial strain because now they will have penalties added because of their late payments on loan payments.
I also learned that companies with little working capital can lease their computer system to keep them from paying out a large sum of money at one time. The lease gives them the opportunity to make monthly payments to save their working capital for other needed responsibilities. Also leasing allows the company to have a lease agreement with a support contract during the lease. Also leasing ensures that they have the most update system because of the slow depreciation rate. Purchasing equipment is a strain on working capital and most often the support contract is costly and must be paid monthly.
Working capital needs to be strong to ensure that the companies can substance during the ups and downs of the encomonic. This will ensure that bills and payroll can be paid monthly on time this includes loan payments.