Working Control

Working capital is a measure of a company's liquidity and financial health. It is calculated by taking a company's current assets and subtracting its current liabilities. Working capital is important because it shows how much money a company has available to fund its day-to-day operations. A healthy working capital ratio indicates that a company has enough cash to pay its bills and meet its short-term obligations.

There are two main types of working capital:

• Net working capital: This is the difference between a company's current assets and current liabilities.
• Gross working capital: This is the sum of a company's current assets minus its inventory.

Net working capital is a more conservative measure of liquidity because it excludes inventory, which can be a volatile asset. Gross working capital is a more comprehensive measure of liquidity because it includes inventory, which is a critical asset for many businesses.

The ideal working capital ratio will vary depending on the industry and the company's specific needs. However, a healthy working capital ratio is generally considered to be between 1.5 and 2.0. A ratio below 1.0 indicates that a company may be struggling to meet its short-term obligations. A ratio above 2.0 may indicate that a company is holding too much cash and could be investing it more productively.

Working capital is an important indicator of a company's financial health. A healthy working capital ratio shows that a company has enough cash to fund its day-to-day operations and meet its short-term obligations.