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Working Capital. How should a business use working capital analysis? which is more important to the...

Working Capital. How should a business use working capital analysis? which is more important to the short term lender: the stock of cash flow or the flow of cash? Is it possible in today's business to operate with no current liabilities?

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Working capital analysis- It is the analysis of sufficiency and liquidity of current assets as compare to current liabilities in a company. It is the analysis of efficiency of current assets to pay the current obligations.

A business should use a working capital analysis to know how efficient current assets are, Current liabilities are being paid on time. Analysis of current assets and current liabilities shows whether company is able to cover its short term debt obligation.

It is not possible in current scenario to operate without current liabilities because if company wants to grow, it has to trade on credit terms and account receivables and account payable will be created. When company raises funds through debt, there is always "Interest payable". Company also has income tax payable as current liability. A business may have no long term obligation but current liabilities are always there, these are related to day to day operations of business.

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