Q. Importance or advantage of the working capital?

Working capital is the lifeblood and never centres of the business. Just like a blood ,that necessary , no business can run without the working capital . the main advantage of the working capital is as follows solvency of the business: adequate working capital helps in maintain the solvency of the business by providing the flow of the production.

Goodwill: sufficient working capital enables a business concerns to make a prompt payment and hence helps in the creating and maintaining the goodwill.

Easy loans: a concern having adequate working capital and high solvency and good credit standing can arrange the loan from banks and other on the easy or favorable terms.

Cash discount: Adequate working capital also enables the concerns to avails cash discount and purchase and reduces the costs.

Regular supply of the raw material: sufficient working capital ensure regular supply of raw material and the continuous production regular payment of the salary and wages and other day to day commitments : a company which has ample working capital can make regular payment of the salary or wages and other day to day commitments which raise the moral of its employee increase the efficiency and reduce the wastage and decrease the cost of the productions.

Exploitation of favorable market conditions: only concern with the adequate the working capital can be exploit favor the high prizes arable market conditions such as purchasing its requirement its bulk when the prices are lower and holding its inventory for the high prices ability to face crisis: adequate working capital enables to concerns to face the business crisis in emergency such as depression because during such periods generally there is much pressure on the working capital.