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Working capital-A basic for Backbenchers.pptx
- 1. Understanding Working Capital MANAGING THE LIFEBLOOD OF BUSINESS BY ANU SARAH DANIEL
- 2. Introduction to Working Capital Definition: Working capital is the difference between a company’s Current assets and Current liabilities. Net Working Capital or NWC (Another term) Importance: It represents a business's operational liquidity and short-term financial health. The ratio which comes out as an answer suggests whether the particular organization has enough assets with it which will in turn help in the payment of the short-term debts. Current Assets: Cash, Accounts Receivable, Inventory Current Liabilities: Accounts Payable, Short-term Debt
- 3. Introduction to Working Capital
- 4. Introduction to Working Capital Cash in Hand- Rs.5000.00 Sundry debtors-Rs.1,00,000.00 Bank Balance-Rs.5000.00 Therefore, Current Assets- Rs 1,10,000.00 Sundry Creditors- Rs.50,000.00 Bank OD- Rs.50000.00 Therefore Current Liabilities-Rs1,00,000.00 Net working Capital- CA-CL = Rs.10000.00
- 5. Key takeaways Working capital, also called net working capital, represents the difference between a current assets and current liabilities. Working capital is a measure of a company’s liquidity and short-term financial health. A company has negative working capital if its ratio of current assets to liabilities is less than it has more current liabilities than current assets). Positive working capital indicates that a company can fund its current operations and invest in activities and growth. High working capital isn’t always a good thing. It might indicate that the business has too inventory, not investing its excess cash, or not capitalizing on low-expense debt opportunities.