Definition of working capital

The concept that concerns us in this review has a special use in the economic field, more precisely regarding the managementadministrative of a company or company.

Because working capital is made up of assets, whether tangible or intangible, that the company in question has available and that serve to decide the economic and investment capacity of said company in the activity daily.

That is, working capital implies all those goods that a company has left over, and which are then allow it to develop its commercial activities and continue, for example, earning cash or acquiring other goods.
When goods are in surplus, we will speak of positive working capital and when the opposite occurs we will be dealing with negative working capital.

Meanwhile, there are several elements that make up the working capital, the main being those products or services that the company markets and that sells to its customers and are translated into constant banknotes and sonorous. We must also include:

Inventory, the open accounts that have to be collected and the values that are traded.

Mostly that capital that is obtained is used to pay suppliers and other expenses that result from the production activity.

It is worth noting that this surplus is taken into account in the short term and, of course, in contrast to the company's liabilities. This difference in favor is precisely what will give us the exact measure of the company's ability to continue developing accordingly. That is, when liquidity is more extensive than debts that mature in the short term

So, the relevance of knowing this economic variable of a company is that it is very useful when establishing for sure the patrimonial harmony that it has, for example, when facing a new business or a investment.

Meanwhile, it will also be so when, for example, the situation is the opposite, when the working capital It is not positive but negative, thus, your knowledge will allow various actions to be planned so that the liquid asset increase and that it is possible to pay debts or maturities that are scheduled in the short term.

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