This means that a company can spend money to produce goods or provide services but may not receive the amount owed to it for another few days, weeks or months. ![]() ![]() Client payment periodsĪlthough payment may be earned and specified at a given moment in time, you often have to wait a while before it is settled. The result is a time lag between the points when money is spent on production and the cash flows in after the goods or services are sold. When a company produces a certain quantity of goods, it often takes time to liquidate this inventory. There are three main reasons that these gaps can appear: Lead times for selling inventory □ What is Working Capital Requirement (WCR) ? These requirements are caused by gaps in your cash flows (money coming in and out) corresponding to cash inflow and cash outflow linked to your business operations, in other words your company’s primary activity. It represents your company’s short-term financing requirements. Working capital requirement (WCR) is the amount of money required to cover your operating costs. What exactly is it? How do you calculate it? How do you interpret it and what actions do you take? 1. In this article, we will help you learn about working capital requirements (frequently known as WCR), a term that is unique to the world of finance. ![]() To ensure the success of their company, it is vital for leaders and financial executives to have a handle on any discrepancies between incomings and outgoings. Working capital requirement is a concept that anyone starting a company has to know and understand.
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