Working Capital Calculation

May 19th, 2015
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Aberystwyth University
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Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses.

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WORKINGORKING CAPITALCAPITALMANAGEMENTMANAGEMENTWORKING CAPITALCurrent assets Current liabilitiesIt measures how much in liquid assets acompany has available to build itsbusiness.A short term loan which provides moneyto buy earning assets.Allows to avail of unexpectedopportunities.WORKING CAPITAL Positive working capital is required to ensurethat a firm is able to continue its operations andthat it has sufficient funds to satisfy bothmaturing short-term debt and upcomingoperational expenses. The management ofworking capital involves managing inventories,accounts receivable and payable and cash. An increase in working capital indicates that thebusiness has either increased current assets (thatis received cash, or other current assets) or hasdecreased current liabilities, for example has paidoff some short-term creditors.Working Capital Management Decisions relation to working capital andshort term financing are referred to as workingcapital management. Management of Working capital refers tomanagement of CA as well as CL. If current assets are less than currentliabilities, an entity has a working capitaldeficiency, also called a working capital deficit. These involve managing the relationship bet. Afirms short term assets and its short termliabilities.Working Capital Management The goal of working capital managementis to ensure that the firm is able tocontinueits operations and that i

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