Computation of working capital, Financial Management

Will you please define the working capital and Calculation of working capital?

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Posted Date: 2/14/2013 12:24:22 AM | Location : United States





Computation of Working Capital:

A measure of both a company''s effectiveness and its short-term financial health. The working capital ratio is evaluated as:

This ratio shows whether a company has enough short term assets to cover its short term debt. Anything below 1 shows negative W/C (working capital). While anything over 2 seems that the company is not investing excess assets. Most consider that a ratio between 1.2 and 2.0 is sufficient.

Also described as "net working capital", or the "working capital ratio".

Posted by Patricia | Posted Date: 2/14/2013 12:25:19 AM


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