principles of finance | principles of finance | Southern New Hampshire University

Working capital can be calculated by subtracting Current Assets from Current Liabilities. Consider that the business has $500,000 worth of assets and $300,000.00 worth of liabilities. The resulting calculation would be $500,000 – $300,000 = $200,000 of working capital on hand.

This result shows that there is sufficient liquidity in the business to pay suppliers’ bills as current assets outnumber current liabilities by an impressive amount. However, it is important to consider other factors such as potential cash expenses over the next few months or any outstanding payments which may come due – before making any definitive conclusions.

In terms of potential cash inflow at the end of the year – this largely depends on how successful sales/operations are over that period & if there will be any one-off events such as mergers/acquisitions etc., which could affect incoming funds significantly. Therefore businesses must factor these potential scenarios into account when forecasting future cash flows & formulating appropriate strategies moving forwards.