Question

Which financing approach to working capital management would you suggest to a business, standing at its growth stage? And why? (3) ​

Answer 1

Explanation:

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Answer 2

Financing approach to working capital management

Explanation:

Short-Term Approach to Working Capital Management Working capital is the difference between cash resources or assets readily convertible into cash ( current assets ) and cash obligations ( current liabilities ).

• Sufficient working capital is required to ensure that a firm can continue its operations and that it has sufficient funds to satisfy both maturing short-term and long-term debt and upcoming operational expenses.
• The management of working capital involves managing inventories, accounts receivable and payable, and cash.
• When calculating working capital we think of net working capital, which is calculated as current assets minus current liabilities.
• In any company, large or small, there is an inherent tradeoff between liquidity and profitability.