Effective Management Of Working Capital

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In the daily operations of the skilled nursing center where I work, there are two kinds of capital, fixed capital and working capital. Fixed capital consists of the building, grounds and equipment and working capital is what is necessary to manage the day to day activities of the center. When I add together the totals for current assets and current liabilities in the balance sheet, a very important figure can be calculated, working capital. Effective management of working capital is essential to my center’s fundamental financial health and operational success. An indication that a facility is in the hands of a strong administrator; is one who has the ability to utilize working capital management to sustain a solid balance between…show more content…
Current assets and current liabilities are the two major players in working capital management. Items that can be converted into cash quickly are called current assets. These would include, cash on hand, inventory, short-term investments and accounts receivable. Liabilities are financial obligations that the organization owes. For example, short-term notes payable; loans that come due in less than one year and accounts payable; money owned for goods and services provided to the business. An unsecured loan, like a credit card is one that is obtained without the use of something valuable like a car or property as collateral for the loan. It is approved and backed by only the borrower’s credit. Borrowers typically must have a good credit score to be approved for unsecured loans like a personal line of credit. When a secured loan is taken out, the lender holds the title or deed or places a lien on something of value, like a car or a home until the loan has been repaid. If the loan is defaulted on, the lender is entitled to take possession. A mortgage and an open-ended home equity loan are an example of a secure loan. The borrowing limits are typically higher and the amount of time on the loan can last for a variable or set amount of
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