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Working Capital

This topic has 3 replies, 2 voices, and was last updated 2 years ago by John Moffat.

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September 2, 2022 at 6:52 am #664905
Isabella1
Participant
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Hello John,
I am stucked in a question will you help me?
If a company is having high working Capital so it means it is having more liquidity or profitability?
I think working capital increase will lead to more liquidity as current asset increases. Am I correct?
September 2, 2022 at 8:57 am #664915
John Moffat
Keymaster
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You are correct 🙂
September 2, 2022 at 2:20 pm #664936
Isabella1
Participant
- Topics: 44
- Replies: 23
I did an Mcq which has an statement “Working Capital should increase as sales increases”.
I am unable to figure relationship between sales and working capital. Increase in credit sales might need working Capital but if these are cash sales so I don’t think it will affect working capital.
September 2, 2022 at 3:11 pm #664943
John Moffat
Keymaster
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If they are selling more then receivables will be higher, cash will be higher, and almost certainly they will carry more inventory.
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