Working capital: defined by the Sticky-Marketing.com monthly magazine |
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Working capital is the money required to finance the day to day operations of an organisation. Working capital may be required to bridge the gap between buying of ingredients or components to eventual payment for goods sold on account. Working capital also has to fund the gap when products may have been made but be being held in stock. Finished products in stock are at full cost, effectively they are company cash resources which are out of circulation therefore additional working capital is required to meet this gap which can only be reclaimed when the stocks are sold (and only if these stocks are not replaced!) and payment for them is received. Various organisations have greater or lesser working capital requirements. Working capital requirements have less to do with profitability, much more to do with cash flow. 10/06/2001 Use your browser back button or
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