Title: Working capital - Wikipedia
Headings: Working capital
Working capital
Contents
Calculation
Inputs
Working capital cycle
Definition
Meaning
Working capital management
Decision criteria
Management of working capital
See also
References
External links

Content: Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses. The management of working capital involves managing inventories, accounts receivable and payable, and cash. Contents
1 Calculation
1.1 Inputs
2 Working capital cycle
2.1 Definition
2.2 Meaning
3 Working capital management
3.1 Decision criteria
3.2 Management of working capital
4 See also
5 References
6 External links
Calculation
Working capital is the difference between current assets and current liabilities. It is not to be confused with trade working capital (the latter excludes cash). The basic calculation of working capital is based on the entity's gross current assets. Working Capital = Current Assets − Current Liabilities {\displaystyle {\text {Working Capital}}= {\text {Current Assets}}- {\text {Current Liabilities}}}
Inputs
Current assets and current liabilities include four accounts which are of special importance. These accounts represent the areas of the business where managers have the most direct impact: cash and cash equivalents (current asset)
accounts receivable (current asset)
inventory (current asset), and
accounts payable (current liability)
The current portion of debt (payable within 12 months) is critical because it represents a short-term claim to current assets and is often secured by long-term assets. Common types of short-term debt are bank loans and lines of credit. An increase in net working capital indicates that the business has either increased current assets (that it has increased its receivables or other current assets) or has decreased current liabilities —for example has paid off some short-term creditors, or a combination of both.