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What is working capital and why is it important to a company?

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  • Post Date 2018-11-08T09:04:44+00:00
  • Post Category New Samples

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What is working capital and why is it important to a company?

What is working capital and why is it important to a company?

INSTRUCTIONS:

1. What is working capital and why is it important to a company? 2. What are the various depreciation methods and how do they compare/contrast? 3. What are the different ways in which a company may invest in the stock of another company and how does the investment influence how the investment is reported on the company`s financial statements?

CONTENT:
Discussion QuestionNameInstitution1. What is working capital and why is it important to a company?Working Capital is a measure of liquidity of a company and hence a measure of its future credit-worthiness. A company that wants to make a borrowing through purchasing commercial paper or bonds may find it more expensive in the event that it does not have enough working capital. In the case of a public company, the stock prices are likely to fall when the market looses faith in the adequacy of the company’s working capital. For start-up and small business which are unable to access borrowings in financial markets, working capital tend to have more dire implications. Working capital can also be looked at as the amount of money start-up or small business need in order to stay in operations (Agrawal, 2008). Start-ups companies have to pay attention to their working capital as it is the money needed to keep the business of such companies running until the break-even point. Too much capital on the other hand implies that some of the company’s assets have not been invested for the long-term, meaning that they have not been properly utilized to help the company grow.2. What are the various depreciation methods and how do they compare/contrast?One of the depreciation methods is the straight-line method that allocates an equal depreciable base amount to every ye...
 

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