A Trading Company's Circulating Capital Management Model

Working capital management is an important part of company management. Lack of working capital is a problem that any enterprise may face in real life, especially in how to coordinate the use of funds for purchases and sales. When there is a problem with financing, people first think about capital market financing, but not all companies can get enough money from the capital market at any time. For example, many medium and small enterprises have difficulty obtaining sufficient funds through bank loans or issuing stocks and bonds. Therefore, in practice, in addition to financing in the capital market, enterprises often solve the problem of lack of working capital, using two aspects: on the one hand, through communication with sales (accelerating asset turnover, pre-sale preparation, etc.) to increase the flow of funds, and on the other hand, by buying (postponing payments, buying options, etc.) reduces the outflow of capital.            Pre-selling products in the sales segment means that the company withdraws some funds in advance through pre-sales to increase the flow of funds. To encourage customers to make purchases in advance, businesses often need to set certain discounts, and customers who book and pay in advance are given discounts. This is a pre-sale preparation strategy.