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Do you think the finding of the working capital can give a conclusion as for the adequacy of its level? Can you explain?

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تم إضافة السؤال من قبل Nadjib RABAHI , Freelancer , My own account
تاريخ النشر: 2016/05/27
Farrukh Abbas Wahla
من قبل Farrukh Abbas Wahla , Accounting Supervisor , Tristar Group

Yes indeed, The working capital ratio (Current Assets/Current Liabilities) indicates whether a company has enough short term assets to cover its short term debt. Anything below1 indicates negative W/C (working capital). While anything over2 means that the company is not investing excess assets. Most believe that a ratio between1.2 and2.0 is sufficient.  Also known as "net working capital". Adequacy of levels of working capital vary by company type, industry, stage of growth and operational efficiency. For example, a rapidly growing company in the same industry with revenues similar to another company may have significantly higher working capital needs. A company experiencing rapid growth may have working capital needs that fluctuate significantly and should therefore add a buffer amount to its acceptable level. The quality of the short-term assets on the balance sheet impacts working capital. For example, a company that requires customer deposits and has strong receivables collection procedures will need less working capital than one whose customers regularly pay in or days.

georgei assi
من قبل georgei assi , مدير حسابات , المجموعة السورية

I apologized for the answer I did not understand the question

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