Accounting / July 19, 2018 / Sharon Hardin
When one thinks of how successful or unsuccessful a business is doing, it’s natural to lean towards the strategic elements of an organization that ensure profits come in: investments, funding decisions and risk management. While these elements are important, the success of a business, especially how it runs its day to day operations, is highly dependent on the effective management of operational cash (or commonly called cash flow or cash on hand). This comes in the form of accounts payable (AP) and accounts receivable (AR).
Net Working Capital It implies the surplus of current assets over current liabilities. A positive net working capital shows the company’s ability to cover short-term liabilities, whereas a negative net working capital indicates the company’s inability in fulfilling short-term obligations.
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