Question and answer
What may happen if an organization neglected to manage its working capital?
Insufficient Inventory Working capital is especially important for businesses that sell products because they need a well-stocked inventory. [ If your working capital is low, you may not have enough cash flow to replenish your inventory before running out of products. In such a case, client satisfaction and sales will suffer. On the other hand, organizations that mainly provide services may have
to hold little or no inventory and can operate with less working capital. Low Liquidity If your working capital is too low, the smallest emergency or unexpected expense can leave your business with no liquidity. This means you may not have enough cash on hand to pay for wages, utility bills and other regular running expenses. Workers will usually resent working without pay and utility companies make a habit of disconnecting clients who don't pay their bills. Penalties If your working capital is less than your running expenses, you will fall behind in your mortgage payments, telephone bills, line of credit costs and other basic expenses. Lenders and service providers will start charging penalties and interest on the money you owe, which won't help your working capital situation. If you fail to fix your working capital issues and continue to miss payments, service providers may cancel their services altogether. Bankruptcy The final outcome for an organization that does not manage its working capital and cannot pay for its debts and other running expenses is bankruptcy. Even if the company has enough assets to pay its creditors, if the money is not at hand, the organization might have to sell its assets or even declare bankruptcy to cover its debts. ]
Expert answered|sipichapie|Points 4779|
Question
Asked 2/26/2013 6:10:46 PM
0 Answers/Comments
Get an answer
New answers
Rating

There are no new answers.

Comments

There are no comments.

Add an answer or comment
Log in or sign up first.
Questions asked by the same visitor
what traits should you have working in the human service field?
Weegy: Pursuing a career in human services requires that you possess certain characteristics and traits. If you have specific qualities you can enter a specialized career in developmental services and social services. [ Each career will require that you obtain certain skills in order for you to be successful. Careers in human services consist of case management, mental healthcare, social work, community support, and counseling. In addition to the traits you possess, you will need to obtain skills that are necessary for your required job tasks. This can be done through a higher education program that offers human services training programs. Developmental services professionals are trained to provide support and services to adults and children with developmental disabilities. You can work with individuals who suffer from autism, epilepsy, down syndrome, and cognitive disabilities in order to help them function and live healthy lifestyles. You will need to possess characteristics that are beneficial to your career. These traits can include: Compassion Patience The desire to help others Consistency Organization ] (More)
Question
Expert Answered
Asked 2/19/2013 1:52:39 PM
0 Answers/Comments
What information is needed to prepare a cash budget?
Weegy: In general an operating budget is based on accrual accounting and, therefore, doesn't necessarily coincide with a cash budget. In general, the cash budget uses the operating budget for operating expenses. [ However, the cash collected differs from the revenue stream in timing only (assuming the company sells on credit). The payment stream also differs from the operating expense budget in timing for those vendors that get paid on credit terms, and also based on the payroll timing. ] User: What is the relationship between an operating and a cash budget? (More)
Question
Expert Answered
Asked 2/19/2013 9:25:03 PM
0 Answers/Comments
What is the relationship between an operating and a cash budget?
Weegy: Your cash budget should be based strictly on the money you expect to have on hand, not payments or bills that are due but haven't been paid. [ By focusing on cash on hand, the cash budget can tell you whether you'll have enough money in the bank to pay all the expenses in the operating budget. If not, you know you need to look for outside sources of funding, defer payment until later or reduce some of your expenses. Read more: What Is the Relationship Between an Operating & a Cash Budget? | eHow.com ] (More)
Question
Expert Answered
Asked 2/19/2013 9:39:07 PM
0 Answers/Comments
What is the break-even point?
Weegy: Break-even (or break even) is a point where any difference between plus or minus or equivalent changes side.. break-even point (BEP) is the point at which cost or expenses and revenue are equal: User: What decisions does the break-even point help an organization make? (More)
Question
Expert Answered
Asked 2/20/2013 7:38:20 AM
0 Answers/Comments
What decisions does the break-even point help an organization make?
Weegy: What Is the Break-even Point and What Decisions Can Break-even Analysis Help an Organization Make? by Charmayne Smith, Demand Media In most cases, the business requires a financial investment before the business begins its operations. [ Even after the operations begin, it often takes time and many sales before the business achieves profitability. The point where the business is no longer operating with a loss but has yet to earn a profit is the business’s break-even point. Break-even Point The break-even point is the point where the business’s sales have generated enough income to cover all of its fixed costs and expenses. At that point, all of the business’s incoming revenue is profit as long as the expenses and costs are not increased and the sales amounts are not reduced. Formula The break-even point is calculated by dividing the business’s fixed expenses by its margin. The margin is determined by subtracting the business’s total variable expenses from its total net sales amount. The margin reflects the percentage of revenue that remains after the business pays all of its expenses. It is the margin that represents the total profit after expenses. The business’s total variable expenses are calculated by adding the business’s total cost of goods sold to its selling expenses. The totals needed to determine the business’s break-even point are located on the business’s income statement, also referred to as the earning statement or profit and loss statement. Decisions The break-even point identifies the total amount of sales the business needs before profit can be earned. When analyzed closely, the break-even analysis also helps the business to identify excessive fixed costs. Since the break-even point is directly related to the fixed costs, reducing and controlling these costs aids the business in achieving a lower break-even point for quicker profitability. Fixed Costs Unlike the business’s variable costs, the fixed costs are not directly related to the ... (More)
Question
Expert Answered
Asked 2/20/2013 7:46:53 AM
0 Answers/Comments
20,458,203 questions answered
Popular Conversations
Weegy Stuff
S
L
Points 712 [Total 2289]| Ratings 1| Comments 702| Invitations 0|Offline
S
L
Points 605 [Total 1172]| Ratings 2| Comments 585| Invitations 0|Offline
S
P
C
L
P
L
1
P
P
1
Points 217 [Total 8094]| Ratings 2| Comments 197| Invitations 0|Offline
S
Points 164 [Total 164]| Ratings 0| Comments 164| Invitations 0|Offline
S
L
1
R
Points 101 [Total 1173]| Ratings 1| Comments 91| Invitations 0|Offline
S
L
Points 101 [Total 3704]| Ratings 0| Comments 101| Invitations 0|Offline
S
1
L
L
Points 75 [Total 8069]| Ratings 0| Comments 75| Invitations 0|Offline
S
Points 53 [Total 53]| Ratings 1| Comments 43| Invitations 0|Offline
S
1
L
1
Points 43 [Total 3484]| Ratings 1| Comments 33| Invitations 0|Offline
S
Points 22 [Total 22]| Ratings 0| Comments 22| Invitations 0|Offline
Home | Contact | Blog | About | Terms | Privacy | Social | ©2015 Purple Inc.