Optimal level of - solvency and liquidity and company may...

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Optimal level of  working capital       is that level where company is capable to pay day to day expenses and company has enough cash to buy the  stocks in case if it does not receive money from debtors on the time. This level is achieved by thinking and using the techniques of  working   capital management . We all know that both low level or over level of working capital is harmful for development of business. If company has  not enough cash to repay its liability, it will create the risk of 
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Unformatted text preview: solvency and liquidity and company may go for liquidation. In case, company has over working capital, it will be misuse of money because that money is not gaining any earning and its opportunity cost will suffer by shareholders and ultimately it will decrease the value of share in share market. So, as finance manager, you should try to create equilibrium or optimal or optimum level of working capital....
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This note was uploaded on 10/19/2011 for the course FINANCE 302 taught by Professor Staff during the Fall '10 term at East West University, Chicago.

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