Balance Sheet - Working Capital, Net Current Assets

Working Capital measure the ability of a company to carry out its business comfortably under normal operating environment without financial stringency, to expand its operations without the need of new financing, and to meet emergencies and losses without disaster.

Working capital is one of the major important factors in determine the financial strength and "current position" of a company. The current position of a company refer to the excess of current assets over current liabilities which is working capital (also known as net current assets) and the ratio of current assets to current liabilities which is current ratio.

Working Capital measure the ability of a company to carry out its business comfortably under normal operating environment without financial stringency, to expand its operations without the need of new financing, and to meet emergencies and losses without disaster.

Shortage of working capital may resulted in slow payment of bills with attendant poor credit rating, liquidity or solvency problem or more serious consequence is bankruptcy.

Total amount of working capital require is highly depend on the the character of the business. A company doing business for cash with rapid inventories turnover may require less working capital compare to manufacturer of heavy machinery sold on long-term payments.

An investors should look at Working capital per dollar sales (working capital / Sales) to compare and access the working capital of companies in same industry. The growth or decline of the working capital over a period of time and working capital per common stock (working capital / common stock) are also worthy to pay attention on.