When constructing a pro forma statement, net working capital generally:

Looking for the answer to the question below related to Working Capital ? When constructing a pro forma statement, net working capital generally:  Options: a) remains fixed. b) varies only if the firm is currently producing at full capacity. c) varies only if the firm maintains a fixed debt-equity ratio. d) varies only if the firm … Read more

Other things held constant, which of the following will cause an increase in net working capital?

Looking for the answer to the question below related to Working Capital ? Other things held constant, which of the following will cause an increase in net working capital?  Options: a. Cash is used to buy marketable securities. b. A cash dividend is declared and paid. c. Merchandise is sold at a profit, but the sale … Read more

A firm has net working capital of $6,800 and current assets of $21,800. what is the current ratio?

Looking for the answer to the question below related to Working Capital ? A firm has net working capital of $6,800 and current assets of $21,800. what is the current ratio?  Options: .69 .60 1.45 1.67 .92 The Correct Answer Is: 1.45 Conclusion I hope you got the answer to your question.  

The change in net working capital when evaluating a capital budgeting decision is

Looking for the answer to the question below related to Working Capital ? The change in net working capital when evaluating a capital budgeting decision is  Options: the change in fixed liabilities minus the change in fixed assets. the increase in current assets  the change in current liabilities minus the change in current assets. the change … Read more

Which one of the following statements concerning net working capital is correct?

Looking for the answer to the question below related to Working Capital ? Which one of the following statements concerning net working capital is correct?  Options: The lower the value of net working capital the greater the ability of a firm to meet its current obligations. An increase in net working capital must also increase current … Read more

Working Capital – Meaning, Types, Needs, Sources and Calculation | Management Notes

Working Capital

What is Working Capital

A working capital is another component of the capital that the business needs to meet its day-to-day requirements. Payments to creditor, salaries to workers, raw material purchases, etc., are generally recurring in nature. They can be easily converted to cash. Hence, short-term capital is also known as working capital. A key aspect of financial management is the management of working capital. Short-term finance is primarily concerned with the liquidity and profitability of the business concern. Working capital management helps business concerns improve their operating performance, as well as meet their short-term liquidity needs.

Therefore, it is not only a part of financial management but also the overall management of a business concern to study working capital management. According to the definition, working capital refers to the capital that is not fixed but it is usually defined as the difference between current assets and current liabilities.

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