6 Reasons Working Capital is the Blood and Nerve Center of a Business

6 Reasons Working Capital is the Blood and Nerve Center of a Business

Why working Capital is most Important Aspect of Every Business?
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Working capital is simply the amount of money that a business has to operate with. It is the current assets minus the current liabilities. Current assets include cash on hand, inventory and accounts receivable. Liabilities include accounts and notes payable, expenses, and current loan/debt payments.

Working capital represents the liquidity of a company, a measure of its value, efficiency or stability (depending on how you want to look at it).

Working capital is important primarily because it is the money that keeps a business running. With little working capital, a company won’t . . . work. Here are some of the ways that working capital is the lifeblood of a business.

1. Strengthening Solvency

Solvency is the measure of how much greater your assets are than your liabilities; it tells you how easily you can pay off your debts. Having sufficient working capital is the first and best way to pay off short-term liabilities. When you are able to easily pay salaries, equipment rentals, and other immediate costs, then your company can run more smoothly.

2. Moving Forward

One of the most effective ways to propel your business forward is with the use of working capital. When you have the right amount of disposable working capital, you can easily pay off any debts or costs and focus on investing for future expansion. Negative working capital (i.e. a situation where your liabilities are greater than your assets) means that you do not have the capacity to expand.

3. Developing Relationships

When a business is able to make all its necessary payments in a timely manner, it breeds trust and goodwill among its employees, with its vendors and other external agents. With sufficient working capital, a business never has to worry about running afoul of someone to whom it owes money.

4. Improving Health

Working capital can tell you how healthy your company currently is. The current liquidity of a business, also the net working capital, is one of the most important determinants of its health. Liquidity tells investors how easily a company’s assets can be converted into cash. As the amount of money available for day-to-day operations, working capital is intimately tied to liquidity and how easily work can get done in the business.

5. Getting Loans

Every business owner hopes to be able to expand his or her business. In cases where large expansions are planned, a loan may have to be taken out. When a business has good solvency and credit, it is more likely to be approved for a loan. Good working capital, therefore, helps you not only expand using your own resources but also helps you find external funding for expansion.

6. Handling Crises

Any business is likely to face a crisis at some time in its life. How these crises are handled depend largely on the working capital available to the business. Firms with good working capital are able to absorb blows to their revenue stream and keep moving forward.

Make Working Capital Work for You

Working capital is either expressed as a money value (assets minus liabilities) or as a ratio (assets over liabilities). Any business should aim for at least a working capital ratio of 1.2. Whether your company is just getting off the ground or has been operating for decades, managing working capital is key to its profitability.

Managing working capital is an important skill to have. As we have seen, a company’s working capital is one of the most important pieces of information to know regarding its current health and future profitability. Managers who understand working capital and how to use it stand poised to leverage its many benefits to increasing profits.

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15 Things That Need To Be Invented Now

The next round of needed life hacks.
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For Millennials, life is constantly being made easier. Compared to our parents' generation, almost everything about the way we run our day-to-day lives has been modified for speed, simplicity, and convenience. You want a cup of coffee? Here, have an instant cup of hot coffee at the push of a button! Missing your friend across the country? Call them with your smartphone, see them instantly! You can Google virtually any question, there is an app for every want and need; each step of the way Millennials are working to make things easier. I have a few ideas to contribute:

1. Extending USB cord: There must be USB plug that can stretch. The way a dogs leash will release more cord as it is pulled on, there needs to be a cord that can stretch as I roll over in bed without pulling the plug out of the wall. The struggle of being attached to a wall is too great.

2. Closet Organizer App: Some mornings you wake up and wonder how it was ever possible that you once found a decent looking outfit in your closet. Other days the prospect of having to dress yourself is just too much. There needs to be an app that can record what is in a closet and make an outfit, for any event, at the ready, similar to what Cher Horowitz has in Clueless.

3. Hangover Curing Drink: Stronger than Gatorade, better for you than pumping your stomach with Advil and water, and putting an end to the old "flu" excuse at work. A foolproof drink that can give everyone what they need to get up, pick their dignity off the floor, and soldier on. You all may thank me later.

4. Rent-A-Boyfriend: Have you ever had one of those weeks where you just need someone to bring you chocolate cake in bed and tell you you're beautiful? Maybe you really can't figure out how to build all the new Ikea furniture for your apartment and you are incapable of rounding up a guy friend to do it. Either way, the ability to rent a boyfriend on a needed basis would be quite handy. Think of all the stuff they could do for you, then you get to return them when you're done! It's like a dream.

5. Parking Tracker: What is it about parking garages that suddenly make everyone's memory go blank? Whatever the reason for the world's inability to keep track of their cars once stationary, it needs to be resolved. Too many minutes are lost aimlessly wandering the garage carrying heavy shopping bags. Please, someone invent a tracking app for your car, so that you can remember exactly where you parked and follow the map directly to it.

6. Forever-Hot Coffee Mug: I'm not sure what type of wizardry would be required to create a coffee mug that can abolish the awful lukewarm state that coffee turns into after such a short period of time, but someone needs to discover it. Long nights of studying and hours-long brunches of switching between the mimosa and the sweet nectar of the Gods will be forever changed by never again fearing cool coffee.

7. Teleportation Pad: The year is 2015; I was promised a flying car. In lieu of the flying car -- I am willing to accept teleportation pads. Think about travel becoming as easy as "stand here and click that button." Imagine not having to bother putting on a bra to go from your apartment to your friend's apartment for wine night! This could be revolutionary.

8. Sassy Siri: Every girl could use someone to help them come up with the perfect come back in a pinch, and who better than Siri! With her constantly involved in your conversations, it would be easy to just ask Siri for a little sass-assistance the next time your best frenemy mocks your highlights.

9. Compliment Earrings: If you have never seen Aquamarine, go rent it now. For those who recall, the star fish earrings were "notorious suck ups" to the girls who wore them. Imagine going through a tough day, when unexpectedly you are given a compliment! Talk about a great mid-day pick up.

10. Food Printer: My stalking of Pinterest food pages has progressed from a mild addiction to a full blown problem; I always find I want the things I see in the pictures immediately. I want to be able to hit print on one of the pictures and have those lemon-blueberry iced cupcakes in my kitchen right then.

11. Necklace De-Tangler: Ladies across the country lose thousands of necklaces to tangled knots. Chains break, two beautiful separates become one big mess, and before you know it your jewelry box is empty! There must be a machine where one could drop their knotted necklaces and have them come out the other side in perfect condition.

12. Hot Slippers: On a cold Monday morning when walking around the kitchen, debating which is worse, waking up or being awake, it would be nice to be comfortable. Nice pajamas are all well and good, but a fuzzy pair of slippers that can become warm? That is the dream. There is no morning too grey or hangover too intense that would not be cured with these slippers.

13. Calorie Rewind: There needs to be a way to take back that entire pepperoni pizza you ate last night. Whether you were not in the proper state of mind to be making that decision, or even if it was emotional turmoil over exams; it shouldn't count. Perhaps the next big thing in weightloss is a pill that allows you to take back a meal. A way to go back in time and undo that embarrassing trip to the doughnut shop down the road in favor of a more healthy alternative? Not a bad idea.

14. Sleepy-Time Studying: How awesome would it be if you could fall asleep with headphones in and wake up knowing an entire textbook? Humans spend an average of 26 years sleeping-- there should be a way to put that time to good use. A way to absorb the information while you sleep should be the next big invention. It would be the perfect cure to the all nighter!

15. Decision Making App: Desperately struggling to pick where to go for dinner? Unable to decide whether to go out or stay in? Unsure of whether it's a day for heels or for flats? These are the everyday questions faced by thousands of Millennials. We need to find a cure for the indecisiveness. An app that takes the guess work out of meaningless day to day questions such as, "Do I want a grande or a vent?" (Or I suppose you could just flip a coin...)

Bonus 16. Articles That Write Themselves: I wish I had a magic box I could give an idea to and it would instantly put print out the article I am trying to write.

Cover Image Credit: giphy.com

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8 Ways You Know You're A Business Major

​Despite the wide variety of majors within business, we all have some pretty similar experiences throughout college.
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Considering all business majors start out with the same core courses, things start out as a bit of a routine. You start to recognize who’s in which major as your classes begin to get smaller. It’s a community within the campus and everyone has to stick together to get through the tough courses.

1. You know economics is important, but you just can’t seem to fully grasp micro and macro.

This is a common issue. If you’ve taken economics at all, you know how complex these graphs can be and you know that for some reason no matter how hard you study there’s always at least that one concept that you just can’t seem to grasp.

2. Your dorm closet is at least half-full of business attire.

Khaki pants, button-down shirts, business suits. Anything from business casual to business formal you know that if you’re a business major it’s in your closet no doubt. You never know when a presentation or a job fair will pop up, so you always need to be prepared to dress for success.

3. You make friends in your classes to complain about exams with.

It’s a rough major and we all know it. Sure, everyone in the sciences always says that they want to switch to business because it’s easier, but we can all tell you that business is hard in its own ways. There’s calculus, statistics, economics, accounting, and so many more classes that consist of difficult concepts and make you question your choice of major. It always feels better to have a few people in your class to turn to after the exam and be reassured when they have the same post-exam expression on their face as you do.

4. You dread the phrase “group project.”

Sure, group projects can be fine. But once you get to college, your group will typically consist of three different types of people. The first being the ones that do all the work, the second being the ones that pretend to do work but really just sit on their phone going through Tinder the whole time, and the third being the ones who just never show up to a single group meeting.

Then the day of the presentation will roll around and someone will forget something important during the actual presentation or something else will go wrong, and all you’ll be able to think about is how you wish you could have done it yourself. Or, on the other hand, there are the few group projects that actually do go as planned and you’re glad you didn’t have to do it all on your own.

5. The idea of a cumulative final makes you want to go hide in a corner of the library for a month.

The fact that most business finals are cumulative is practically evil. There’s so much that goes into one business course that it’s almost impossible to study everything for a week and then go to take a 50-60 question exam that doesn’t even cover half of what you studied. It’s so easy to get such similar terms and concepts confused that cumulative finals just shouldn’t be a thing for business majors. But, unfortunately, they are, so you’ll see all the business majors huddled in groups in the library every exam week.

6. It physically pains you when someone says they want to switch their major to business “because it’s easy.”

First of all, you’re wrong. Second of all, you’re seriously wrong. Third of all, just no. Business is at the center of all other majors whether anyone wants to admit that or not. The world functions around the way that business works. Within the economy lies markets in which people sell their goods and services, which is what every other industry makes up. Therefore, business gets to be extremely complex. Whether it’s accounting with professional standards that must be followed, or marketing with certain concepts for production and distribution, business is much more than just sitting at a desk. Business goes beyond just simple memorization, it goes into deep understanding of concepts and formulas as well as certain software that is considered to be an industry norm.

7. You’re seriously competitive.

Whether it’s a class project, a job fair, an exam grade, or a leadership role, you’re after it no doubt. The thing about business is that you always have to find a way to have a leg up over your competitor, so all of the business majors are consistently thinking of how they can advance their careers before they even begin.

8. You tend to be a leader.

Most business majors tend to be natural-born leaders whether they realize it or not. Although it may take a while for a leadership opportunity to appear, when it does, business majors are ready.

If you felt that some or all of these statements applied to you and you haven’t declared a major yet, maybe you should seriously consider a major in the business field. To incoming freshmen, I know this all may sound scary with how difficult the courses can be, but I promise you it is such a rewarding opportunity. To those of us pushing through with our declared business majors, best of luck to all of you. Maybe I’ll see you on Wall Street someday.

Cover Image Credit: Mekenna Passner

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