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Define Working Capital?

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Question added by ASARUDEEN SOWKATH ALI , Planning Manager , Alfanar Construction
Date Posted: 2013/06/11

it is calculated as the current assets minus the current liabilities.

Tanveer Ahmad Niazi
by Tanveer Ahmad Niazi , CEO (Self-employed) , Project Management Training & Consultant

Adding to Raja Moiz answer; Working capital is defined as the difference between current assets and current liabilities.

Current assets are the most liquid of your assets, meaning they are cash or can be quickly converted to cash.

Current liabilities are any obligations due within one year. Working capital measures what is leftover once you subtract your current liabilities from your current assets, and can be a positive or negative amount. The working capital is available to pay your company's current debts, and represents the cushion or margin of protection you can give your short-term creditors.

Osama Najeeb
by Osama Najeeb , My position was of a crew trainer , McDonalds Corporation UK

Working capital is the capital needed for day to day business expense, it helps in cash management by showing the cash out flow that is needed to maintain working capital.

Bhavin Mehta CCP(CCE), PMP
by Bhavin Mehta CCP(CCE), PMP , Assistant Manager , Larsen and Toubro Ltd

simple definition: Working capital is the amounts of funds that business has to deploy out of its pocket in order to run its day to day operations , until payment arrives.The need of working capital arises due to time lag between cost expenditure of the business and payment arrival from the client.

ASARUDEEN SOWKATH ALI
by ASARUDEEN SOWKATH ALI , Planning Manager , Alfanar Construction

Thank you Mr.
Najeeb, in addition to your answer i want to add some more points against the Working Capital.
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.

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