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