Forms of Short-term Financing/Working Capital: Difference between revisions
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Working capital is defined as the excess of current assets over current liabilities. Current assets are the most liquid and most easily convertible to cash of all assets. Current liabilities are obligations due within one year; therefore, working capital measures what is available to pay a company's current debts. It also represents the cushion or margin of protection a company can give their short-term creditors. Working capital is essential for a company to meet its continuous operational needs. Its adequacy influences the firm's ability to meet its trade and short-term debt obligations as well as to remain financially viable. | Working capital is defined as the excess of current assets over current liabilities. Current assets are the most liquid and most easily convertible to cash of all assets. Current liabilities are obligations due within one year; therefore, working capital measures what is available to pay a company's current debts. It also represents the cushion or margin of protection a company can give their short-term creditors. Working capital is essential for a company to meet its continuous operational needs. Its adequacy influences the firm's ability to meet its trade and short-term debt obligations as well as to remain financially viable. | ||
Latest revision as of 16:59, 8 November 2009
Working capital is defined as the excess of current assets over current liabilities. Current assets are the most liquid and most easily convertible to cash of all assets. Current liabilities are obligations due within one year; therefore, working capital measures what is available to pay a company's current debts. It also represents the cushion or margin of protection a company can give their short-term creditors. Working capital is essential for a company to meet its continuous operational needs. Its adequacy influences the firm's ability to meet its trade and short-term debt obligations as well as to remain financially viable.