Page 386 - F1 Integrated Workbook STUDENT 2018
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Chapter 23
Working capital balancing act
The main objective of working capital management is to get the right balance of
current assets and current liabilities right. This can also be seen as a trade-off
between cash flow vs profits.
Current assets are a major item on the statement of financial position and are
especially significant to smaller firms. Mismanagement of working capital is therefore
a common cause of business failure e.g:
Inability to meet bills as they fall due.
Demands on cash during periods of growth being too great (overtrading).
Overstocking.
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