Working capital
There are few areas in the day-to-day operations of a business, which command more of a managers' attention than working capital. As the name implies, working capital is about the capital that is needed to work the business and it is the lifeblood of any business. The key to managing working capital successfully is to balance liquidity and profitability. Lack of working capital restricts growth and development and; in many cases leads to business failure, which was amply demonstrated during the last economic recession in UK.
The main sources of working capital are the current assets such as debtors and stock that a company can use to generate cash quickly. However, it is important to note that the business would also has current liabilities, such as PAYE, and so these have to be included too when calculating how much working capital a company has available to run the operation. Thus working capital is the same as net current assets, which is an important part of a company's balance sheet. Company financial statements refer to working capital as 'net current assets' and it is calculated as follows:
Working capital (net current assets) = Current Assets - Current Liabilities
The market for working capital finance is well supplied with increasing numbers of finance providers competing to secure new lending opportunities. The main working capital products (you can click on them to learn more) available to SMEs are as follows:
• Invoice finance
• Term loans
• Bank overdrafts
• Stock finance
• Small firms loan guarantee scheme
Contact Us for a FREE Consultation
If you are interested in knowing more about working capital finance facilities free of charge and without obligation then please contact us or telephone us on (020) 7016 9775. A senior consultant will be happy to discuss your options and the issues involved.
Further Help
• Click here if you need some help with your business plan and free Excel templates for cash flow forecasts
Last modified: 23/02/2007 21:00:17