working capital positive negative effects

Working Capital

Working Capital

Gross Working Capital

Net

Working

Capital

• The .

• Liquid funds available to a business and any assets that are anticipated will be exchanged for cash within a one year period.

Gross Working Capital

• The term net working capital refers to the difference between the current assets and current liabilities.Net 

Working Capital

Adequate supply of raw materials

Cash to pay for wages, power and other costs

Creating a stock of finished good

The ability to grant credit to its customers

Obtaining discounts

WORKING CAPITAL

Cash crisis may emerge due to scarcity of working funds

Optimum capacity utilization of fixed assets may not be achieved due to non-availability 

of the working capital

The business may fail to honor its commitment in time, thereby adversely 

affecting its credibilityNon-availability of stocks due to non-availability of funds may resultin production stoppage

WORKING CAPITAL

• Excess of working capital may result in unnecessary accumulation of inventories

• It may lead to offer too liberal credit terms to buyers and very poor recovery system and cash management

• Over-investment in working capital makes capital less productive and may reduce return on investment