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Working capital positive negative effects


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Working capital positive negative effects..meaning example application..Easy explanation

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Working capital positive negative effects

  1. 1. Working Capital
  2. 2. • The . • Liquid funds available to a business and any assets that are anticipated will be exchanged for cash within a one year period. Gross Working Capital • The term net working capital refers to the difference between the current assets and current liabilities. Net Working Capital
  3. 3. Adequate supply of raw materials Cash to pay for wages, power and other costs Creating a stock of finished good The ability to grant credit to its customers Obtaining discounts
  4. 4. WORKING CAPITAL Cash crisis may emerge due to scarcity of working funds Optimum capacity utilization of fixed assets may not be achieved due to non-availability of the working capital The business may fail to honor its commitment in time, thereby adversely affecting its credibility Non-availability of stocks due to non-availability of funds may result in production stoppage
  5. 5. WORKING CAPITAL • Excess of working capital may result in unnecessary accumulation of inventories • It may lead to offer too liberal credit terms to buyers and very poor recovery system and cash management • Over-investment in working capital makes capital less productive and may reduce return on investment