Custom «Working Capital and Risk » Essay Paper Sample
The main reason behind the writing of this article is to examine an array of financing options which are to help corporate organizations manage the working capital efficiently. The author of the article likens the DNA as the link to life with the supply chains, which are seen as the real supporters of businesses, commerce, finance or/ and even banks. In the same manner the DNA is complex, so are the supply chains which are complex and interrelated. The supply chain is depicted in the article as being so complex to an extent that each step in the supply chain remains very unpredictable.
The effect of the above standpoint is to show that businesses ought to have the reserves of physical stock in physical stock and working capital so as to lessen the effects of the shocks of the systems such as excessive stock, deficit in stock or even late payment of invoices. The complexity of supply chains is seen in the fact that it comprises three parts: the transit of goods and services from suppliers to buyers and of information and cash between the suppliers and buyers (the financial supply chain).
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The article also reinstates the importance of working capital, maintaining that as the money available, it enables the running of day-to-day business operations. The minimum line is for the company is to ensure that the working capital generates sufficient funds for the payment of the firm's liabilities. The liabilities may be bank charges, taxes, cost of stocks, the cost of raw materials and interests.
To ensure that a company remains afloat, the company must ensure a substantially higher working capital to ensure the liquidity of funds in the face of uncertainties and risks. Some of the ways that can be used to avert the risks include: the acceptance of an accurate bill of exchange; the right use of the documentary credits; and the accurate use of the letter of credit.