Working Capital Management Working Capital Finance | Page 3

Working Capital Management
Understanding Working Capital Finance
Numerous funds are required to setup a business and get it running.
Working capital funding is the cost of funds that is used for the purpose
of financing a business. Business cannot do without working capital
financing. The cost of capital is dependent on the financing mode used
for the purpose. It means the cost of equity if business is financed
through equity only or cost of debt if debt was the sole means of
finance. Numerous companies use the combination of equity and debt
for capital funding.
Visit our website for More information on
Business Capital Loans
The ratio of the working capital finance shows whether the company
possesses the short term assets to cover the short term debts of the
business. Anything below 1 indicates negative WC and anything over 2
indicates company is not investing in the excess assets. The ratio
between is 1.2 and 2.0 is considered adequate. If company fails to exceed
3
its current asses from its current liabilities, it could be well on its way to
disaster and have difficulty in paying back the short-term creditors.
Page - 03