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Working Capital management play an important role in the day to day running of the business, even a profitable business may liquidate if it fails to payoff its short term liabilities such paying the overdrafts, paying wages etc.
Working Capital requires that you manage your receivables, payables & cash efficiently because even if a profitable business run out of cash it would be very difficult for it to survive.
Receivables turnover ratio tells us how efficient the company is in recovering the cash from its receivables. The efficiency is assessed by comparing the ratio with comparative figures of the industry in which the company operates and with the prior years.
