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Working Capital

IIsabella4y ago
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?
John MoffatJohn MoffatTutor4y ago#1
You are correct :-)
IIsabella4y ago#2
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.
John MoffatJohn MoffatTutor4y ago#3
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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