13 Disadvantages Of Inadequate Working Capital

1. A concern which has inadequate working capital cannot pay its short-term liabilities in time. Thus, it will lose its reputation and shall not be able to get good credit facilities. 2. The growth of the business concern will be stagnated. 3. It cannot buy its requirements in bulk and cannot avail of discounts, etc. 4. It becomes difficult for the firm to exploit favorable market conditions and undertake profitable projects due to lack of working capital. 5. The advantages of being able to offer a credit line to customers are forgone. 6. Under utilisation of production facilities. 7. Return on investment decreases. 8. The firm cannot pay day-to-day expenses of its operations and it created inefficiencies, increases costs and reduces the profits of business. 9. Whenever the goodwill of the company is affected, the credit worthiness of the company is decreased to some extent among the banks and financial institutions. 10. Maintenance of plant and machinery: Due to lack of adequate working capital, plant and machinery can not be repaired, renovated, maintain or modernized in appropriate time. This result in non utilization.