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: Working Capital is a measure of the firm's liquidity. It is calculated using the assets and liabilities listed on the Balance Sheet. A significant amount of working capital indicates healthy levels of liquidity. Assets that increase over time are a good indication of the firm's growth. Effective current asset planning is the ability to accurately forecast sales, and match production schedules with the sales forecast. When actual sales and forecast sales are different, inventory reductions or build-ups likely occur, which affect receivables and cash flow. Typically, a firm's fixed assets slowly increase as its capacity for production grows and equipment is upgraded. Current assets which are dependent on production and sales levels, however, fluctuate in the short-term. Inventory increases as the firm produces more than it sells. When sales outpace production, inventory decreases and receivables rise.