How do you turn companies around? Is there a way to determine if they are economically viable and, if so, can you predict if a particular level of investment will allow them to improve their business to the extent that the investment earns a good return? Is there a way to keep track of the investment and its impact? If so, how would you go about doing it?
Working capital is critical to any business because it’s how companies fund their operations. Most companies manage their working capital with a combination of cash flow, inventory, credit policies (for their customers) and short term financing. In tough economic times, it’s difficult to find and grow existing sources of revenue and even more difficult to locate new sources of revenue. The current financial crisis has put severe constraints on access to capital because banks have been extremely risk averse. The only other option companies have is to reduce costs and improve operational efficiencies. Due to the speed of the economic decline, many companies have to cut costs so dramatically that they will begin to affect the core operations of the company. This not only threatens their ability to remain competitive, but it may also threaten their survival in the long run. In many cases, companies will probably need to make adjustments to their strategies in order to avoid extinction.