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    Why is effective working capital management important? What

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    1-Why is effective working capital management important? What are some working capital strategies used in your organization? Would you consider your organization's approach flexible, moderate, or restrictive? Why?

    2-What is an operating cycle? Why is it important? What are some methods your organization uses to improve its operating cycle?

    3-What are some inventory management techniques utilized at your organization? What types of organizations use consignment as an technique? What are advantages of this approach?

    4- What are some types of spontaneous financing available to organizations? Which is used by your organization? Is it important for an organization to establish a line of credit? Why or why not?

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    1-Why is effective working capital management important? What are some working capital strategies used in your organization? Would you consider your organization's approach flexible, moderate, or restrictive? Why? 200 words

    The working capital of a business is calculated by subtracting the current liabilities from the current assets. Ideally, companies need a strong working capital ratio (higher assets than liabilities). Effective working capital management allows managers to assess the company's working capital ratio, and to make further decisions regarding financing. When financing is needed, another analysis is conducted to determine if the optimal source of financing is through debt (usually bank loans) or through equity financing, where the company buys back shares of their stock from shareholders, which is then called treasury stock.
    The main working capital strategy in my organization is to keep debt as low as possible. By doing so, our firm is able to raise capital when needed through debt financing, because our current liabilities are very low. This leads to financing at a lower interest rate. Typically, the higher the liabilities are, the higher risk of default from the company, which produces loans that the company must pay at a higher interest rate.
    I would consider my firm's approach restrictive.
    We are very conservative in our borrowing to keep our debt low. By doing so, our balance sheet is more favorable, and we are able to maintain a higher cash flow because our cash is not tied up in paying current liabilities. We critically analyze all borrowing decisions. ...

    Solution Summary

    Why is effective working capital management important? What are some working capital strategies used in your organization? Would you consider your organization's approach flexible, moderate, or restrictive? Why?

    2-What is an operating cycle? Why is it important? What are some methods your organization uses to improve its operating cycle?

    3-What are some inventory management techniques utilized at your organization? What types of organizations use consignment as an technique? What are advantages of this approach?

    4- What are some types of spontaneous financing available to organizations? Which is used by your organization? Is it important for an organization to establish a line of credit? Why or why not?

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