Concerning specific factors that might materially affect the
working capital of a firm, an earlier empirical research by Nunn (1981) uses both correlation analysis and factor analysis to discover the determinants of
working capital management for US sample firms.
So, avail a Bajaj Finserv
Working Capital Loan as soon as you think you need external aid to manage your cash flow efficiently.
The tire manufacturer in this situation requires a lot of cash to sustain its
working capital as it must still pay its suppliers/vendors for the materials to make tires while it waits for the car dealer to pay the $200,000 in full over the next five years.
The importance of
working capital management is closely related to the fact that most companies invest large amounts of money into current assets and rely on current liabilities as a source of financing (Deloof 2003, Koralun-Bereznicka 2014)
Working capital management consists of all decisions that are related to the management of current assets and liabilities, i.e.
Interest rates are set to increase further in the future in line with US Fed's rates hike, and if this is the case,
working capital becomes the most attractive source of cash to fund the potential capex or dividend needs, said the study.
While some might struggle to pay off salaries or obligations because of poor
working capital management, the worst thing that may happen is going into a debt spiral.
One of the recent study by Shah and Arif (2018) evidenced a significant negative relationship between net
working capital with the firm's value of the Pakistani firms.
One of a managerial accounting strategy is
working capital management.
The
working capital cycle expressed in number of days, is the average time duration that it takes to turn investment into cash and profit, referred to as
working capital days.
In addition to the cash benefits received from better
working capital management, leading
working capital performers have shown better KPIs across all key financial metrics such as revenue growth, EBITDA margin and return on capital employed, demonstrating the impact of
working capital efficiency extends well beyond cash.
The squeeze in
working capital was initially felt by small sized companies in 2015, continuing through to 2016, added the report titled "2017 Middle East
Working Capital Study" from PwC, a leading provider of assurance, advisory and tax services.
The UAE is the only key economy in the Middle East not suffering from a deteriorating
working capital performance, a PwC report shows.