Fin/571 – working capital simulation: managing growth assignment –
SNC’s limited access to financing had a negative effect on its working capital as fewer funds were available to finance day-to-day operations. This led to an inability to invest in new projects or hire more personnel, which ultimately decreased the company’s overall competitiveness and profitability. Unexpected expenses also had to covered by cash reserves. If not closely monitored, these could easily become unsustainable.
Limited access to funding can affect organizations of all sizes in a variety of ways. Because of their smaller size, small businesses are more likely to fail to obtain traditional funding. They may find themselves in a vicious circle where they have to use their existing resources for essential functions, rather than investing in growth opportunities. This could lead them down the road. Organizations of any size and industry need to make sure they have adequate financing in order to maximize their returns, while also minimizing the risk of unexpected cash flows or other expenses.