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Input to Increase Working Capital of the Company Department

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1. A company can be forced to go into bankruptcy if it has a negative working capital and not be able to pay its bills on time. Have you experience such a position or to a lesser extend (short of bankruptcy)? If so what were the remedies taken by your company?

2. Your management approaches you for inputs to increase the working capital of your department or the company. What suggestions would you give?

3. In your personal experience do you prefer to lease or buy an automobile? Describe why you selected that decision over the other one.

4. Have you ever been in a position at work to make a decision of whether to lease or buy? If so can you share your experience with us?

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1. Yes, I have experienced a situation where the company was short of going bankrupt. In such situation the remedies that the company took was to sell part of the company to equity investors in order to increase the capital base in the company and to lower the level of debt levels in the company's capital structure. The company became which was a partnership before became an incorporated company with venture capital investors being the main investors in the company.

2. Working capital denotes the efficiency of a business. There are a number of ways that working capital of business can be increase to ensure operational efficiency. These include: evaluating the terms of credit offered to customers and how long they take to pay for the goods. In essence the company needs to communicate its credit policy to the clients clearly so that they can understand the maximum credit that they can be given, and the payment terms and any requirements for deposits. This would reduce delays in payments. A good collections system for receivables should also be put in place where the business enforces a disciplined payment policy and culture that ensure efficiency in payments resolves any disputes in payments quickly and collects receivable effectively in a manner that is optimal to both the business and the client (Quinn, 2010). This would enable faster and effective collection of payments from customers for the goods delivered. Another suggestion would be not avoiding depleting working capital by using it to finance long term assets such as equipments, and borrowing short term loans to increase the working capital in a company (BDC, 2012). In addition, they can also refinance their long term assets which can increase the cash holdings in the company.

3. In my personal experience I would prefer to lease an automobile rather than buy. Leasing enables one to be able to afford a nice good car with low payments and it is easier to get a new vehicle every three years thereby saving on excessive maintenance costs, unlike in purchasing where one has to pay the whole amount which is ...

Solution Summary

The solution discusses the input to increase working capital of the company department.

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