Q. Describe the Working capital?
Working capital is the capital available for conducting day-to-day operations of the business and includes current assets and current liabilities.
|
Current assets
|
Current liabilities
|
|
Inventories
Trade receivables
Cash
Short term investments
|
Trade payables
Bank overdrafts
|
Working capital can be viewed as a whole though interest is generally focussed on the individual components like inventories or trade receivables. Working capital is effectively the net current assets of a business.
Working capital can be either:
|
Positive
|
Current assets are greater than current liabilities
|
|
Negative
|
Current assets are less than current liabilities
|