Title: Financial Analysis: Defining Liquidity and Working Capital Management | UniversalClass
Headings: 
Financial Analysis: Defining Liquidity and Working Capital Management
Current Assets
CASH CONVERSION CYCLE (CCC)

Content: Investors, creditors, and corporate others are concerned with the firm's working capital, since it is indicative of the firm's financial health and efficient operations. If the firm's inventory, accounts receivable, accounts payable, and cash accounts are being managed effectively, it will be reflected in its working capital. Mathematically, if the working capital ratio is less than 1, it indicates the amount of liabilities exceeds the amount of assets. The result is negative working capital and the firm could soon experience financial difficulties, or bankruptcy. A high working capital ratio can indicate an excess of inventory, or that surplus assets are not being invested into the company. The preferred working capital ratio varies according to industry. However, a working capital ratio between 1.2 and 2.0 is generally considered acceptable. Interested in learning more? Why not take an online class in Financial Analysis? Regardless if the business is a startup or it has been in operation for awhile, running smoothly, and growing, the working capital is a practical thermometer to determine the firm's overall financial health.