The working capital is an element that allows knowing the business balance, between the obligations that it owns and its assets.
For the administration of any large or small company, it is necessary take decisions that allow you to optimize and elevate your productivityTherefore, knowing the real financial capacity is a task of great responsibility in order to carry out routine operations in a balanced way.
Advertisements
In this sense, managing efficiently allows the company to have some advantage over others of the same nature.
In this article you will find:
What is working capital?
The working capital It is the capacity or potential that a company has to operate, after fulfilling its obligations. It will represent a surplus, which is made up of its heritage o all those assets, inventories, will include the pending collections, which the company owns.
Advertisements
These resources give the company the opportunity to cover critical activities, such as the acquisition of raw material, cancel payroll and make other relevant investments.
All these assets must have the ability to be converted into cash quickly, that is, at short term.
Advertisements
In short, the sales made by the company constitute the usual principle of working capital, which is required for the acquisition of goods, shares, inventory replacement, among others.
Advertisements
How is working capital calculated?
For him calculation of working capital, current or current liabilities are subtracted from current assets, as it is also known, this result is known as net working capital.
The formula to perform this calculation is as follows:
Advertisements
CT = AC-PC
Where:
CT: Working capital.
AC: They are current assets.
PC: Corresponds to current liabilities.
Current assets
In general lines current assetsThey have the characteristic of being converted into money in less than a year, that is, in the short term. Among these assets are very important stocks, investments, inventory, accounts next to collect, that is, all that value that is negotiable in the short term and that generates liquidity to the business.
These assets are classified into three items, according to their fluidity:
- Available assets: Bank accounts, cash and other investments.
- Required assets: Here the rights that the company has are considered.
- Realizable asset: Corresponds to inventories, raw materials, among others.
- Negotiable assets: Are those securities that must be sold, depending on whether they are listed on the stock market, whether they are bonds or certificates.
Current or current liabilities
Regarding the most important liabilities, we have the accounts and obligations acquired pending cancellation, the obligations with those services that have not been canceled but have already been received, which is also known as liabilities accumulated.
As the current assets of the company are greater than its current liabilities, we can say that there is a net working capital.
As there is a greater difference between assets and current or current liabilities, the greater the ability of the company to meet its obligations.
Can working capital be positive or negative?
In a company, this will be positive when its current assets are greater than its current liabilities. On the other hand, its capital will be negative, when there is no equilibrium in the business assets. However, this will not mean the bankruptcy of the company, but it does require that it manage and develop strategies so that its current assets increase.
The correct administration of this capital is what allows the company to comply in a timely manner with the payments or obligations acquired.
Working capital must be kept in balance, both excess and insufficiency are unfavorable for the company.
Working capital balance
The equilibrium of the Working Capital allows the company:
- Protect yourself during inflationary processes or devaluations.
- Have credit with the company's suppliers.
- Maintain inventory to meet customers.
- Make favorable conditions available to clients to grant them credit.
The working capital must allow the company to solve emergency situations, it can be classified as permanent and temporary capital.
Importance of managing working capital
Working capital is directly related to the ability of the company to produce and manage its cash, known as cash flow, that is, its liquidity.
The correct management of the company's resources is essential, as this will allow it to remain solvent.
Manage the working capital implies the maneuverability of its assets and its current liabilities to keep both at acceptable levels, it also merits measure the resources with which the same account to continue its operations after having fulfilled all the liabilities to cancel.
Any company that manages to work safely and efficiency, you will be able to achieve success in your efforts, and this purpose is directly related to the decisions you carry out during the administration of physical resources and financial resources.
