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As a business, it is incredibly important to balance your working capital. Working capital is defined as the current assets less the current liabilities and is an important indicator of a company’s liquidity and financial health. Business owners need to keep a close eye on the ratio of their working capital relative to their sales as this can give deeper insight into the financial standing of their business.

Export Growth Diffrrence between October March 2017 Vs. Working Capital to Sales Ratio

Graph illustrating export growth and working capital to sales ratio

This graph illustrates the difference in export growth and working capital to sales ratios.

The growth in working capital relative to sales can have implications for a businesses’ ability to export. Studies have shown a positive relationship between export growth and working capital. The more working capital enterprises possess, the more capital they can use to take advantage of export opportunities.

KPIs for Cash Management

Pie chart showing key performance indicators for cash management

This pie chart shows key performance indicators (KPIs) for cash management. These metrics are used to help businesses better manage their working capital. They give valuable insight into the financial standing of a business, including cash flow and liquidity. The KPIs shown include collections to credit ratios, receivables turnover ratios and total assets to total liabilities.

Having a good understanding of these KPIs can be invaluable for business owners. By monitoring them, businesses can better manage their debt and get a better understanding of the risk posed by their current liabilities. They can also calculate the costs associated with their business activities, better plan for the future and identify any areas where cash may be leaking or where improvements are needed.

Ultimately, keeping a close eye on your working capital is an important part of running a successful business. By understanding the relationship between export growth and working capital, as well as keeping track of important KPIs, entrepreneurs can ensure they are making smart and informed decisions with their financial management.

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