Importance of Working Capital
Working capital, which includes raw material and money in hand, is essential for businesses to operate smoothly. Here's why:

Raw Material
- Raw material is the basic component required for production. Without it, a business cannot manufacture its products. Having an adequate supply of raw material ensures that production can continue without interruptions.
- By maintaining a sufficient stock of raw material, a business can also take advantage of bulk discounts and avoid price fluctuations in the market.

Money in Hand
- Money in hand is crucial for making payments to suppliers, employees, and other stakeholders. Without sufficient funds, a business may face delays in payments, which can harm its relationships with suppliers and impact its creditworthiness.
- Having money in hand also allows a business to take advantage of opportunities such as discounts for early payments or investments in new projects.

During Production
- During the production process, various expenses such as utility bills, wages, and maintenance costs need to be covered. Having working capital ensures that these expenses can be met in a timely manner, keeping the production process running smoothly.
- Additionally, unexpected costs or emergencies may arise during production. Having a buffer of working capital provides a safety net to deal with such situations without disrupting operations.
In conclusion, working capital, which includes raw material and money in hand, is vital for businesses to sustain their operations and seize opportunities for growth. By managing working capital effectively, businesses can ensure their financial stability and success in the long run.