Sir, what are the effects of working capital (current assests _current liabilities) on profit, i mean it has either direct or indirect effect on profit?
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Interpretation of financial statements
9y ago#1There is no direct effect.
There can be an indirect effect because having too much working capital can mean that they are borrowing more that they should, and the interest on the borrowing will reduce borrowing.
Having too little working capital can mean that (for example) they have little inventory and are therefore having to turn away customers (because they do not have enough to sell them) which again would reduce profits.
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