Working capital (abbreviated WC) is a financial metric which represents operating liquidity available to a business, organization or other entity, including governmental entity. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. Net working capital is calculated as current assets minus current liabilities. It is a derivation of working capital, that is commonly used in valuation techniques such as DCFs (Discounted cash flows). If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit.
A company can be endowed with assets and profitability but short of liquidity if its assets cannot readily be converted into cash. 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. The management of working capital involves managing inventories, accounts receivable and payable, and cash.
Read more about Working Capital: Calculation, Working Capital Management
Famous quotes containing the words working and/or capital:
“I don’t know a great deal about life in Washington for women—I spent a summer there once working in the White House, and my main memories of the experience have to do with a very bad permanent wave I have always been convinced kept me from having a meaningful relationship with President Kennedy ...”
—Nora Ephron (b. 1941)
“Capital as such is not evil; it is its wrong use that is evil. Capital in some form or other will always be needed.”
—Mohandas K. Gandhi (1869–1948)