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Blog entries categorized under :

Making Your Working Capital Work

by Terry H Hill
Terry H Hill
Terry H. Hill is the Chief Business Mentor at Training for Entrepreneurs.com. H
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on Tuesday, 01 March 2011
Finance 0 Comments

Blog working capital1 300x201 Making Your Working Capital WorkThe more rapidly that your business expands, the greater the need for working capital becomes.If you have insufficient working capital – the money necessary to keep your business functioning – your enterprise is doomed to fail. Many businesses, that are profitable on-paper, are forced to “close their doors” due to their inability to meet short-term debts when they come due. However, by implementing sound working capital management strategies, your enterprise can flourish; in other words, your assets are working for you!

At one time or another, most businesses have the need to borrow money in order to finance their growth. The ability to obtain a loan is based on the credit worthiness of a business. The two major factors that determine credit worthiness are the existence and extent of collateral and the liquidity of the business. Your company’s balance sheet is used to assess both of these factors. On your balance sheet, working capital represents the difference between current assets and current liabilities — the capital that you currently have to finance operations. That number, plus your key working capital ratios, indicates to your creditors your ability to pay your bills.

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