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: As an absolute rule of funders, each of them wants to see a positive working capital because positive working capital implies there are sufficient current assets to meet current obligations. In contrast, companies risk being unable to meet current obligations with current assets when working capital is negative. While it's theoretically possible for a company to indefinitely show negative working capital on regularly reported balance sheets (since working capital may actually be positive between reporting periods), working capital will generally need to be non-negative for the business to be sustainable
Reasons why a business may show negative or low working capital over the long term while not indicating financial distress include: Assets above or liabilities below their true economic value
Accrual basis accounting creating deferred revenue while the cost of goods sold is lower than the revenue to be generated
E.g. a software as a service business or newspaper receives cash from customers early on, but has to include the cash as a deferred revenue liability until the service is delivered. The cost of delivering the service or newspaper is usually lower than revenue thus, when the revenue is recognized, the business will generate gross income. Working capital management
Corporate finance

Working capital
Cash conversion cycle
Return on capital
Economic value added
Just-in-time
Economic order quantity
Discounts and allowances
Factoring
Reverse factoring
Sections
Managerial finance
Financial accounting
Management accounting
Mergers and acquisitions
Balance sheet analysis
Business plan
Corporate action
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Clawback
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Decisions relating to working capital and short-term financing are referred to as working capital management. These involve managing the relationship between a firm's short-term assets and its short-term liabilities. The goal of working capital management is to ensure that the firm is able to continue its operations and that it has sufficient cash flow to satisfy both maturing short-term debt and upcoming operational expenses. A managerial accounting strategy focusing on maintaining efficient levels of both components of working capital, current assets, and current liabilities, in respect to each other. Working capital management ensures a company has sufficient cash flow in order to meet its short-term debt obligations and operating expenses.