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What is Working Capital
Working Capital, usually the abbreviation WC is used. It is a term that refers to the active items of cash cycle (i.e. items that can be found on the assets side of the balance sheet) - inventory, receivables and financial assets.

Working Capital, usually the abbreviation WC is used. It is a term that refers to the active items of the cash cycle (i.e. items that can be found on the assets side of the balance sheet) - inventory, receivables and financial assets.

Calculation:

WC = inventories + receivables + financial assets

Use of the working capital in practice: The indicator is used by enterprise management, e.g. in working capital management. CFO manages individual components of working capital, defines its optimum level according to the volume and nature of sales, monitors recoverability of receivables, appreciates its individual components. The CFO from his position cannot influence the individual items of working capital. His role is to encourage others to search better solutions.

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Last update: 07.11.2016

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