what three actions can a firm take to minimize its net working capital?

Expert Solution

Answer :- Net working capital is difference of current assets and current liablities

It can be minimised by Decrease in Current Asset or Increase in Current Liablity.

The three actions that firm can take to minimize its net working capital are :-

(i) Manage Inventory : By reducing amount of inventory means do not over stock the inventory. I can be done by using Just In Time Inventory System that means stock are ordered only when needed and it is not unneccesarily stored in ware house. And thus it reduce our current asset.

(ii) Giving Incentive to receivable :- By giving them extra discount for paying in time & other benefit, which will help in reducing the receivable. And thus minimizing net working capital.

(iii) Improve accounts payable :- By negotiating with supplier, we can increase the payment time to supplier, which will result in increase in current liablity and thus improving Net working capital.

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what three actions can a firm take to minimize its net working capital?

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