Importance of Optimum Working Capital

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Importance of Optimum Working Capital


What is the meaning of Optimum Working Capital?

The meaning of working capital is the amount of money that is sufficient to meet the day to day operational activities of the business concern. There can be no business that can run successfully in Singapore without optimum working capital. On the other hand, having adequate working capital can make the flow of the business smoothly. Many financial institutions in Singapore support business organizations and cater to Business Loan Singapore.

Any uncertainties and emergencies can easily be dealt with by Capitall Business Loan. It can increase the liquidity and the valuation of the business increases the profitability and the returns on capital and increases the capability to face the uncertainties and risks, improve solvency and credit rating, etc. Establishing ratio analysis, inventory management, and cash management are very important to determine the optimum working capital.

Importance of optimum Working Capital

The following explains the importance of the Working Capital

Solvency of the Business

An uninterrupted flow of production can only be possible with optimum working capital. Finished goods can be increased in the sales turnover and the result is increased cash in hand. The solvency of the business is also maintained this way.

Cash Discount

The suppliers will be ready to offer you discounts if you maintain a proper cash balance.


Goodwill can be maintained. This happens by itself when the business can maintain the solvency of the business. This will help you to make payments with the predetermined time. So, the goodwill of a business should be created and maintained consistently.


Any smart business can determine the requirement of optimum business capital. This helps to ensure the liquidity of the business by making the necessary loan arrangements with the help of Capitall Business loan.

Easy loan

If a business concern maintains high solvency and goodwill, banks and other financial institutions will be ready to extend the Business Loan Singapore. Availing loans on favorable terms will become very easy.

Meeting unseen contingencies

Having optimum working capital can save a business from emergencies. A business can successfully meet the contingencies. The impact or influence of the emergencies can be mitigated to a great extent.

Regular Supply of Raw materials

The supply of raw materials can never be a problem with optimum working capital. Your operations will run smoothly and ensure high profits.

High Morale

It is common to find some unethical practices followed by the employees. To keep a check on this working capital, misuse of funds can be highlighted through business operations. However, the increased use of cash by the employees can result in higher income and high morale will also be maintained.

Regular payments

It is important to make sure that the wages and salaries and other operational expenses should be paid at a stipulated time. This is only when you have optimum working capital and manages it efficiently. The regular payment of salaries and wages can increase the efficiency of the employees by reducing the wastage, costs and enhances the production and the profits as well.

Good relations with the Banks and Financial Institutions

This can be made possible, only when the business repays the Business Loan Singapore and interest within the due date. And even for this maintaining and managing working capital only can help it.

Using favorable market conditions

Usually, trade discounts and low prices are available for bulk purchases. A business can take advantage of these market conditions only when it has adequate working capital.

Increased Fixed Assets Productivity

The fixed assets are acquired for increasing the earning capacity of the business concern. When the fixed assets are used properly, it automatically increases the productivity of the business and thereby increases the cash flows.

Ability to Face Crises

Working capital helps in enabling the business to face and tackle any business concerns like depression, etc. During the times of depression, there would be no working capital in most of the business companies. The business company which had optimum capital during this situation, then that company can reap benefits.

Research and Innovation program

Without a sufficient amount of business capital, there even can’t be a dream of the Research and Innovation program.

The quick and regular return on Investments

Any investor will like to fetch money very soon from his investments. Moreover, they also like regular returns on investment. So a business must pay dividends to its shareholders quickly and regularly. This is possible only with a sufficient amount of working capital. It will increase the confidence of the shareholders.

Expansion Facilitation

The expansion of any business is possible only with working capital. This requires additional funds. For a successful implementation of the expansion program, working capital is very compulsory.

Increased Profitability

The right proportion of Fixed and current assets is very important. The maintenance of the working capital can ensure the right proportion of both types of assets. It will also increase the profitability of the business and make the institutions trust us to provide us with Business Loan Singapore.