How do I calculate working capital?

Working Capital is a financial value that represents the liquidity of the company based on available current assets and current obligations. If you want to calculate working capital, simply deduct the total current assets of the company from the total current obligations. For example, if the company has $ 1 million in the US (USD) in current assets and $ 750,000 in current obligations, working capital is $ 250,000. Although this example suggests working capital as a positive value, it is possible to have negative working capital during lifelong business. Current assets are usually listed first in the balance sheet. This number includes the equivalents of cash and cash, receivables, supplies, prepaid accounts and short -term investments. The last two items are included in current assets only if it expires in 12 months or less. Analysts and investors use current asset to calculate working capital because these items represent assets that are easier to turn into cash than JIné items that the company owns the company. These items include due and short -term loans such as credit lines, credit cards and other short -term debt obligations. These debts usually arise due to normal business activities. Although these items are not commonly secured by collateral, they represent legal obligations that must be paid.

Financial analysts and accountants may use the working capital ratio when attempting to calculate working capital. This ratio is provided by a statistical indicator for comparison with the ratio of working capital of industry standard or leading competitor. The ratio used for the calculation of working capital is the current asset of DIHNED according to the current obligations. Using data from the previous example, the share capital of the company is 1.33 (1,000,000 /750,000). If this number is less than 1.0, it suggests that the company has negative working capital. Picture pEMS 2.0 may indicate that the company has excessive assets and does not use them to generate multiple capital. The ideal ratio of working capital is therefore between 1.0 and 2.0.

Using a working capital ratio, it provides a different level of understanding for the company's management. Changing the current asset value from the previous example assume the current assets of $ 2,000,000 and current obligations of $ 750,000. While the working capital formula indicates a positive working capital of $ 1,250,000 ($ 2,000,000 - 750,000), the ratio is 2.67 (2,000,000 /750,000). Company management may therefore have to use short -term assets of the company to generate higher income.