Working Capital

Posted in Finance, Accounting and Economics Terms, Total Reads: 2239
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Definition: Working Capital

It is a measure of both a company's efficiency and its short-term financial health. The working capital ratio is calculated as:

Working Capital= Current Assets- Current Liablities

Positive working capital means that the company is able to pay off its short-term liabilities. Negative working capital means that a company currently is unable to meet its short-term liabilities with its current assets (cash, accounts receivable and inventory). Also known as "net working capital", or the "working capital ratio".

Examples

Hero Motocorp Ltd.

Mar-09

Inventories

326.83

Raw materials, packing material & stores & spares

243.14

Raw material

201.44

Packing material


Stores & spares

41.7

Finished & semi-finished goods

83.69

Finished goods

61.01

Semi-finished goods

22.68

Receivables

455.76

Sundry debtors, outstanding less than six months

146

Sundry debtors, outstanding over six months

3.94

Sale of investments and other receivables

62.51

Cash and bank balance

219.57

Cash balance

0.38

Bank balance

219.19

Current assets

1,002.20


Current liabilities & provisions

2,052.80

Sundry creditors

703

Acceptances


Deposits & advances from customers,etc.

28.6

Other current liabilities

794.2

Provisions

                                           527

Net Working Capital

                                    -1050.60


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