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Definition of 'Working Capital'

A measure of both a company's efficiency and itsshort-term financial health. The working capitalratio is calculated as:

This ratio indicates whether a company has

enough short term assets to cover its short termdebt. Anything below 1 indicates negative W/C

(working capital). While anything over 2 means

that the company is not investing excess assets.

Most believe that a ratio between 1.2 and 2.0 is

sufficient.

Also known as "net working capital", or the

"working capital ratio".

Investopedia explains 'WorkingCapital'If a company's current assets do not exceed its

current liabilities, then it may run into trouble

paying back creditors in the short term. The

worst-case scenario is bankruptcy. A declining

working capital ratio over a longer time period

could also be a red flag that warrants further

analysis. For example, it could be that the

company's sales volumes are decreasing and, as aresult, its accounts receivables number continues

to get smaller and smaller.

Working capital also gives investors an idea of the

company's underlying operational efficiency.

Money that is tied up in inventory or money thatcustomers still owe to the company cannot be

used to pay off any of the company's obligations.

So, if a company is not operating in the most

efficient manner (slow collection), it will show up

as an increase in the working capital. This can be

seen by comparing the working capital from one

period to another; slow collection may signal an

underlying problem in the company's operations.

Definicin de "Capital de Trabajo

Una medida de la eficiencia de la empresa y su

situacin financiera a corto plazo. El ratio de

capital de trabajo se calcula como:

Capital de Trabajo = Activos Corrientes

Pasivo Corriente

Esta relacin indica si una empresa tiene

activos suficientes a corto plazo para cubrir su

deuda a corto plazo. Cualquier valor negativo

por debajo de 1 de W/C (capital de

trabajo). Aunque algo ms de 2 significa que la

compaa no est invirtiendo activos en

exceso. La mayora cree entonces que el

proporcin entre 1.2 y 2.0 es.

Tambin conocido como "capital neto de

trabajo", o "el ratio de capital de trabajo".

Investopedia explica "Capital de

TrabajoSi los activos corrientes de una empresa no

excedan a los pasivos corrientes, entonces

podemos encontrarnos en problemas para

pagar a sus acreedores a corto plazo. El peor

escenario es la quiebra. Una disminucin de

ratio de capital de trabajo durante un perodo

de tiempo ms largo tambin podra ser unaseal de alerta que merece un anlisis ms

detallado. Por ejemplo, podra ser que los

volmenes de ventas de la compaa se estn

reduciendo y, como resultado, el nmero de

cuentas por cobrar sigue ms y ms pequeos.

El capital de trabajo tambin da a los

inversionistas una idea de la eficiencia operativa

fundamental de la compaa. El dinero que esinvertido en el inventario o el dinero que los

clientes todava tienen con la empresa no puede

ser utilizado para pagar cualquiera de las

obligaciones de la empresa. As que, si una

empresa no est funcionando de la manera ms

eficiente (cobro lento), se mostrar como un

aumento en el capital de trabajo. Esto se puede

ver comparando el capital de trabajo de un

perodo a otro, el cobro lento puede ser seal

de un problema fundamental en las operaciones

de la compaa.

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