Net Working Capital Is Often Thought of as the Balance

question 68

Essay

Net working capital is often thought of as the balance of completely liquid assets and liabilities.However, this is not completely true.Please explain why parts of working capital can become stagnant and hurt cash levels, even if a firm is growing and profitable.

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Definitions:

Demand Curve

A graph showing the relationship between the price of a product and the quantity demanded by consumers.

Chase Aggregate Plan

A planning approach that adjusts production rates and workforce levels to match demand fluctuations, minimizing inventory and staffing costs.

Hiring Workers

The process of identifying, recruiting, selecting, and onboarding individuals to fill job vacancies.

Laying Off Workers

The process of temporarily or permanently removing employees from their positions due to economic constraints or organizational restructuring.