What is the meaning of gross working capital

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What is the Meaning of Gross Working Capital?

Gross working capital is a measure of a company’s liquidity, which is the ability to meet short-term obligations. It is the difference between a company’s current assets and current liabilities. Gross working capital is an important measure of a company’s financial health, as it is a key indicator of the company’s ability to pay its bills and meet its financial obligations.

Current Assets

Current assets are assets that can be converted to cash within one year. Examples of current assets include cash, accounts receivable, inventory, and marketable securities. Current assets are important because they provide the funds necessary to pay for the company’s short-term expenses.

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Current Liabilities

Current liabilities are obligations that must be paid within one year. Examples of current liabilities include accounts payable, wages payable, and taxes payable. Current liabilities are important because they represent the company’s short-term obligations that must be paid in order to keep the business running.

Gross Working Capital

Gross working capital is the difference between a company’s current assets and current liabilities. It is calculated by subtracting current liabilities from current assets. A positive gross working capital indicates that the company has sufficient liquidity to meet its short-term obligations. A negative gross working capital indicates that the company may not be able to pay its short-term obligations and should take steps to improve its liquidity.

Conclusion

Gross working capital is an important measure of a company’s financial health. It is the difference between a company’s current assets and current liabilities and indicates the company’s ability to meet its short-term obligations. A positive gross working capital indicates that the company has sufficient liquidity, while a negative gross working capital indicates that the company may not be able to pay its short-term obligations.

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