Week 7 Working Capital Management 2

Week 7 Working Capital Management 2 - would indicate a...

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A company needs a stable working capital in order for creditors and investors to be inclined to do business with that company. Since the creditors and investors will be primarily concerned with getting paid, a company’s ability to pay back their short term liabilities is important. Working capital is a good indicator in a firm’s ability to pay back their liabilities since it is calculated by the different between current assets and current liabilities. A company that is performing well
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Unformatted text preview: would indicate a higher working capital than a struggling company. However, it is important to note that working capital is more important in some industries than other. An over-simplified example is that working capital is more important to companies that are product based rather than service based, where people may be the most important asset to that company. Source: http://www.investopedia.com/university/financialstatements/financialstatements6.asp...
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