Understand Working Capital Cycle
by RAKBANK
Working capital is the money you need for the day-to-day operations of your company. Too little capital at the wrong time can cause major problems for your business. Working capital is a company's current assets minus its current liabilities. That amount is the working capital ratio, or current ratio.
What is a working capital cycle?
It's the time it takes for your company to be paid for the goods or services it provides. In other words, it's the time required to convert your assets and liabilities into cash. A short working capital cycle is an effective one.
Even with a high amount of working capital, you can run into trouble if your current assets are not turning into cash. For example, if your assets are in the form of inventory, that inventory needs to be sold in order to generate capital. Similarly, if your company is waiting on payments from customers for too long, that's capital out of your pocket.
How Working Capital Cycle Works?
Does your working capital need a boost?
There are many finance options available: discounting, loans, overdrafts, letters of credit, trust receipts and guarantees. There are other ways, too. Take a close look at your assets and liabilities and see what actions you can take to make your capital work for you. A new kind of working capital!
For more information, speak to your Relationship Manager today or email us at: [email protected].