In an era when global competition makes raising prices difficult and just when companies need cash flow to expand, invest in new technologies, and pay down debt, this newly articulated discipline represents a managerial tool for the future.
Inventories, raw material, work-in-progress, finished goods, and company receivables, all constitute what is called working capital. On average most companies use around 20% of working capital in total sales to keep the engine running. This figure doesn't have to be 20%, in fact it doesn't even have to exist at all!! Like all capital, working capital costs money, so reducing it yields savings.
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