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:
“The working woman may be quick to see any problems with children as her fault because she isnt as available to them. However, the fact that she is employed is rarely central to the conflict. And overall, studies show, being employed doesnt have negative effects on children; carefully done research consistently makes this clear.”
—Grace Baruch (20th century)
“Self-esteem evolves in kids primarily through the quality of our relationships with them. Because they cant see themselves directly, children know themselves by reflection. For the first several years of their lives, you are their major influence. Later on, teachers and friends come into the picture. But especially at the beginning, youre it with a capital I.”
—Stephanie Martson (20th century)