Working Capital!

Working capital is a measure of business efficiency and its short-term financial soundness. Employment capital is calculated as follows.

Working Capital = current assets - current liabilities

The working capital ratio indicates whether there are enough short-term assets to cover short-term borrowings. All less than 1 indicate negative W / C (working capital). Those exceeding 2 mean that the company does not invest any excess assets. Most people think that a ratio between 1.2 and 2.0 is sufficient. It is also called "net working capital".

Working capital (WC) is a financial indicator that represents the liquidity available to a company, organization, or other entity, including government agencies. In addition to tangible fixed assets, ,working capital is considered part of working capital. Total working capital equals current assets. Working capital is calculated as current assets less current liabilities. If current assets are smaller than current liabilities, the project is called lack of working capital, lack of working capital.

Companies may have assets and profitability, but liquidity will be insufficient unless assets can easily be converted into cash. Working capital is necessary to ensure that you have sufficient funds to meet both short-term borrowings and future operating expenses. Working capital management is management of inventory, receipts, accruals and cash.

If the current assets of the business do not exceed the current liabilities, there is a possibility that it will be terminated in a short period of time. The worst situation is bankruptcy. A decline in the working capital ratio over a long period may be a red flag that may be a better test. For example, the number of sales companies may decline, and as a result, accounts receivable may decrease or decrease. The acquisition of capital also informs investors of the operational effectiveness of the underlying business. The amount related to the stock or money that the customer pays to the company can not be used to repay the company's obligation. Therefore, if an enterprise does not operate with the most efficient way (slow recovery), it will occur as an increase in working capital. It can be seen by comparing the working capital from time to time. Late collection may indicate problems around the operation of the project.

Things to keep in mind:

• If the ratio is less than 1, it has negative working capital.
• A high working capital ratio is not necessarily a good thing. It may indicate that there are too many shares or not investing surplus cash.

What is "Working Capital Management"?

Working Capital management refers to a corporate management strategy designed to track and utilize the two parts of working capital, short-term assets and current liabilities and is most effective for companies that guarantee financial transactions. The primary objective of working capital management is to continue to ensure sufficient cash flow for the Company to cover short-term operating expenses and short-term obligations.

 Management of capital operations is generally an income ratio consisting of monitoring cash flows, assets and liabilities, based on analysis of the ratio of key operating cost items including working capital ratio, relief rate and relief rate. Effective management of working capital helps smooth the company's financial management and it also helps improve profitability and profitability. Working capital management includes inventory management, accounts receivable management and accounts receivable management.