Which action will most effectively improve a business's working capital position?
Understand the Problem
The question asks which action would improve a business's working capital position. Working capital is the difference between a company's current assets and its current liabilities. Improving this position generally means increasing current assets or decreasing current liabilities.
Answer
Expedite accounts receivable collections.
The most effective action to improve a business's working capital position is to expedite accounts receivable collections. This accelerates cash inflow, directly boosting working capital.
Answer for screen readers
The most effective action to improve a business's working capital position is to expedite accounts receivable collections. This accelerates cash inflow, directly boosting working capital.
More Information
Improving working capital is crucial for a company's short-term financial health. Efficient management of current assets and liabilities ensures that a company has enough liquidity to meet its short-term obligations.
Tips
A common mistake is focusing solely on increasing sales without managing the associated increase in accounts receivable and inventory, which can strain working capital.
Sources
- 9 ways to improve working capital | Taulia - taulia.com
- Working Capital Management - CashAnalytics - cashanalytics.com
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