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Anonymous

19 Dec 2020

Career

Is working capital a hidden time bomb or a hidden goldmine? Is positive or negative working capital better for your business?

Working capital is basically the “capital” that you need in your business to make it “working” on an ongoing basis.

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Working capital= Current assets - Current liabilities

Of course, positive working capital will be better. If a company have negative working capital, they will have problem paying creditors. High working capital also act as a cushion in case something goes wrong, example Covid lockdowns. Working capital is not the only way of analysing liquidity.

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