Working capital positive negative effects..meaning example application..Easy explanation

1. Working Capital

5. • 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

11. 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

15. 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
credibility
Non-availability of
stocks due to
non-availability of
funds may result
in production
stoppage

16. 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