working capital
Importance of wc
1)wc provides the business with ongoing investment in its current assets that enable the business to operate business needs a minimum cash balance to meet its basic day to day expenses and to provide a reserve for unexpected costs and expenses business needs wc for prepaid business expenses such as insurance policies, licence or security deposit and etc. 2) addresses the seasonal or cyclical financing needs. supports the build up of current assets needed to gen revenue
Financial capital
any economic resource measured in terms of money used by entrepreneurs and businesses to buy what they need to make their products or to provide their services to the sector of the economy upon which their operation is based.
current assets
assets that can be converted into cash within one year or less inventories/ stocks, A/r, debtors, cash and short-term securities
working capital
current assets- current liabilities net current assets provide liquidity to firms ensure the firms have sufficient cash flows to meet its current liabilities measure of firm's efficiency and the state of its financial health in short-term
ca<cl
negative wc firm unable to meet its cl using its ca
current liabilities
obligations owed by the firm that are expected to come due within one year or less, comprise principally of A/P short-term borrowings and taxes payable
ca>cl
positive wc firm is able to pay off cl
fixed capital
capital used for long-term investment of the business
Capital
fixed and working capital