Commerce Exam > Commerce Videos > Entrepreneurship Class 12 > Working Capital
Working Capital Video Lecture | Entrepreneurship Class 12 - Commerce
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19 videos|62 docs|12 tests
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FAQs on Working Capital Video Lecture - Entrepreneurship Class 12 - Commerce
| 1. What is working capital? |  |
Ans. Working capital refers to the amount of money a company has available to cover its day-to-day operations. It is calculated by subtracting current liabilities from current assets. This capital is essential for meeting short-term obligations such as paying suppliers, managing inventory, and covering operational expenses.
| 2. How can working capital be improved? | |
Ans. There are several ways to improve working capital. One way is to negotiate favorable payment terms with suppliers, such as extended payment terms or discounts for early payments. Another approach is to optimize inventory management by reducing excess stock and improving demand forecasting. Additionally, companies can focus on improving their cash conversion cycle by shortening the time it takes to turn inventory into cash.
| 3. Why is working capital important for a business? | |
Ans. Working capital is crucial for the smooth functioning of a business. It ensures that a company has enough liquidity to meet its short-term financial obligations, such as paying employees and suppliers. Insufficient working capital can lead to cash flow problems, missed opportunities, and even bankruptcy. Adequate working capital allows businesses to seize growth opportunities, invest in new projects, and withstand economic downturns.
| 4. What are the consequences of negative working capital? | |
Ans. Negative working capital occurs when current liabilities exceed current assets. This situation can have detrimental effects on a business. It may lead to difficulties in paying suppliers, limited access to credit, and strained relationships with stakeholders. Negative working capital can also hinder a company's ability to invest in growth opportunities and may signal financial instability to lenders and investors.
| 5. How can a company determine its optimal level of working capital? | |
Ans. The optimal level of working capital varies for each company and depends on factors such as industry, business cycle, and growth plans. To determine the ideal level, a company can analyze historical cash flows, industry benchmarks, and its own growth projections. It is important to strike a balance between having sufficient working capital to meet obligations and avoiding excessive capital tied up in non-productive assets. Regular monitoring and adjusting of working capital levels is necessary to ensure optimal financial health.
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Nov 23, 2024 Last updated |
Video Description: Working Capital for Commerce 2024 is part of Entrepreneurship Class 12 preparation.
The notes and questions for Working Capital have been prepared according to the Commerce exam syllabus.
Information about Working Capital covers all important topics for Commerce 2024 Exam.
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Introduction of Working Capital in English is available as part of our Entrepreneurship Class 12 for Commerce & Working Capital in
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Video Lecture & Questions for Working Capital Video Lecture | Entrepreneurship Class 12 - Commerce - Commerce full syllabus preparation | Free video for Commerce exam to prepare for Entrepreneurship Class 12.
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