Question

How are customers and suppliers affected by a firm’s working capital management decisions?

Answer 1

Answer : Firm's Working Capital Management affects customer as well as supplier . Working Capital is the amount which is required by every business in its day to day operation.Generally Customers are loyal to those firms which provides them with steady and regular supply of goods which requires the business to maintain inventory all the time in order to avoid stock out cost and to maintain long and healthy relationship with customer . Maintaining Inventory may increase the cost of firm for maintaining Working Capital. But this helps to increase the sales of the firm and also provides customer satisfaction and working capital decisions helps to maintain loyalty among customers .In this way Firm' working capital management decision influence Customer's.

On the other hands supplier also extends trade credit according to the type of Industry . A firm' Working capital management decisions also affects supplier they are dealing with . Because decisions taken by the firm relating to the working capital managemnet affects to maintain the long and vital relationship with the supplier.Relationship with supplier also helps to provide uninterruppted supply of goods to firm . In this In this way Firm' working capital management decision influence Supplier.