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What is the purpose of working capital?

The cash available for day-to-day operations of an organization. Strictly speaking, one borrows cash (and not working capital) to be able to buy assets or to pay for obligations. Also called current capital.

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Question added by Nadia Ahmed Mohammed Saeed , T/L. Credi t& Risk , Canar Telecommunication Co. LTD.
Date Posted: 2013/08/04
Saleem Alia
by Saleem Alia , Credit control manager , ThyssenKrupp Saudia Arabia (Elevators)

To measures how much in liquid assets a company has available to build its business Working capital = current assets - current liability The figure could be positive or negative

Sherin Dharmasheelan
by Sherin Dharmasheelan , Senior Credit Controller , Maritime and Mercantile International LLC

The purpose of working capital is to make sure that the organisation has the required funds to function on a day to day basis.
In other words, working capital is the amount of capital required by an organisation to meet its day to day expenses.
Petty cash for daily expenses is a classic example of working capital.

Jamshid Bajaffer MCICM MA
by Jamshid Bajaffer MCICM MA , Consultant - Finance and Operation Efficiency , SAMRA FOODSERVE LTD

In simple terms, Working capital is the cash available to a business/organization for the running of the day to day operations.The main purpose of Working capital is to measure the amount available for the business to meet its short term obligations.
Sources of Working capital can be long term loans, net income from sales, share holder payments and/or sale of assets.

Velappan Srinivasan
by Velappan Srinivasan , Financial Advisor , TRPL,OPERA ESPORTS PRIVATE LTD

Working capital is the funds required for  day to day runing the establishment such as purchase of raw materials,manufacturing and other Expense (Direct Expenses),Sales and Admn Expenses,payment of  Interest and Taxes.We can say it is the life blood of the industry for running.

Current Ratio is   Total Current Assets/ Total Current Liability, As per  Indian  standard  the ratio should be at least 1.33  of the total liability

Ifeanyi Onyems
by Ifeanyi Onyems , Financial Control Officer , Intercontinental Bank / Access Bank Plc

The main purpose of Working Capital is to help an organisation meet its day-to-day financial needs.

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