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Working capital & Gearing - Coggle Diagram
Working capital & Gearing
the difference between
a company’s current assets
cash
accounts receivable
inventories of raw materials and finished goods
current liabilities
accounts payable
a measure of
a company's liquidity
operational efficiency
short-term financial health
positive working capital
the potential to invest and grow
negative working capital
trouble growing or paying back creditors
The gearing of the company
“high geared”
the level of borrowing is high when compared to its ordinary share capital
increasing a company’s profitability when the company’s trading is expanding
a lowly-geared company
borrowings which are relatively low
Types of working capital
permanent
keeps the business flowing throughout the year
temporary
account of seasoned, cyclical or unexpected fluctuations in the business.
serviced from an overdraft facility