Advantages and disadvantages of adequate working capital

Advantages of adequate working capital

 i) Helps in maintaining goodwill of the firm.

ii) Helps in maintaining solvency of the firm.

iii) Helps the firm in getting regular supply if raw material.

iv) Helps the firm in getting regular return on investment.

v) Helps the firm in getting payment.

vi) Helps the firm to face the crisis.

Vii) Helps the firm in getting loan easily from the banks.

Viii) Helps the firm in getting cash discount.

Disadvantages of inadequate working capital

 i) It leads to excessive debtors.

ii) Spare funds are of no use and earn no profit.

iii) Firm fails to maintain the relationship with the banks due to non requirement of funds.

iv) Leads to unnecessary purchasing.

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