Working capital means?

Working capital means?

working capital It is indicative of the liquidity of the company. which is very important in business Because it can indicate the efficiency of the company's various financial operations very well.

Working Capital (Working Capital) is the capital used to work in the company for general internal business operations. Every company must have a working capital reserve for use in the business. An important part of working capital is inventory, accounts payable. and trade accounts receivable

Formula for calculating reserve working capital

Trade accounts receivable + inventories - trade accounts payable = working capital

Calculated working capital No matter how little or how much will reflect the liquidity of the company and the financial health of that company

On the other hand, if there is too much working capital, it is not good for the company. Because it can indicate a lack of business expansion. But if the cash flow is too low, it's not good for the company. Because it reflects the lack of financial liquidity of the company itself.

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