Working Capital Example

The working capital is the sum of all the assets of a company that can come from different entry points such as:

• Investments
• Sales
• Storage etc.

Working capital is the instrument that the company has for all movements, expenses and processes.

There are different ways to name working capital such as:

• Current capital
• Working capital
• Rotation capital
• Rotation background
• Working capital

The way to calculate working capital is through cash flow, used in accounting, which allows us to control the surplus and deficiency of active capital in the company and manage the working capital "TC" in the area that required.

Example of working capital:

In the company "Mondragón Dress Suits" is a new company and as such had capital deficiencies within of the sewing area, where material had to be constantly acquired without sufficient active media to do it.

The manager of the company asked the accounting department of the company, which was given to the task to review all departments to rectify the distribution of money in the respective sections.

In order to properly separate expenses and receipts, the accountants used cash flow, which is the most appropriate tool for this procedure. which gives as a result, the surplus and deficit of each department, allowing a better distribution of capital and allowing the lost capital to be recovered at the nearest moment.