What Is Working Capital And How Do You Forecast It?
If we deduct current liabilities from current assets of the company during a period (usually a year) we would get working capital. Working capital is the difference between how much cash is tied up in inventories, accounts receivables etc. and how much cash needs to be paid for accounts payable and other short-term obligations. From the working capital, you would also be able to understand the ratio (current ratio) between current assets and current liabilities. The current ratio will give you an idea about the liquidity of the company.
