UNDERSTANDING WORKING CAPITAL FINANCING
February 9th 2015 at 4:07pm Published by firstdownadmin
Working capital is calculated as current assets minus current liabilities. … Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses.
Working capital is important to because it is a measure of a company’s ability to pay off short-term expenses or debts. On the other hand, too much working capital means that some assets are not being invested for the long-term, so they are not being put to good use in helping the company grow as much as possible.
Working capital financing is funding that is taken to finance a company’s everyday operations. This financing is not used to buy long-term assets or investments and are, instead, used to provide the working capital that covers a company’s short-term operational needs.