Working Capital Calculation

May 19th, 2015
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Aberystwyth University
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“Cash is king”. Does this timeless phrase sound familiar? It should. Rich or poor, young or old, at one point in our lives, we have all heard or will hear this phrase. This phrase is whispered in today’s financial market louder than ever.

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Working Capital Management Working Capital ManagementWorking Capital ManagementMichael E. HinkleAmerican Military University Cash is king. Does this timeless phrase sound familiar? It should. Rich or poor, young or old, at one point in our lives, we have all heard or will hear this phrase. This phrase is whispered in todays financial market louder than ever. These three simple words have a deep-seated meaning in todays financial world. These three words are very real when operating a business. Cash is the most liquid asset a business has. The use of cash and the manipulation of cash flow is the key to all successful business operations. Having enough cash or some form of cash for day-to-day operations is essential. Cash in its most basic form is needed to conduct the ebb and flow of everyday supply and demand. So the key to great business is to keep plenty of cash on hand, right? Wrong. Having too much cash on hand is considered sterile. Sterile cash is inefficient and does not promote growth. In order to solve this dilemma and understand cash flow, we turn to a concept called working capital management. In the simplest form, working capital is nothing more than current assets minus current liabilities. This is a very basic and easily understood formula by most business managers. This could be a horrible assumption for a newly appointed management team or even some seasoned teams. As with

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