23 Feb In my opinion, the stock on hand can be the key to improving the working capital of the company. Of all the components of working capital, the stock is something we can control. We can press
accounting question and need support to help me learn.
In my opinion, the stock on hand can be the key to improving the working capital of the company. Of all the components of working capital, the stock is something we can control. We can pressure our debtors to pay us instantly, but we cannot have direct control over them because they are separate legal entities and, in the end, they are the ones who give us business.
We may tend to delay payments from our suppliers, but it ruins business relationships and hinders goodwill in the industry. Also, if we delay payments, they may not supply goods in the future. Maintaining liquidity in the form of funds in the bank can help the flow of working capital, but it comes at an opportunity cost.
With all of this in mind, I personally believe that inventory management can be of great help in improving the working capital of the company. Over-stock should be avoided and stock turnover rates should be high.
This answer is generic. There are industries that work with negative working capital, such as electronic commerce, telecommunications, etc. So do some research on working capital before answering
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