Bankruptcy and Working capital: Difference between pages

Revision as of 11:20, 10 February 2017

Working capital is normally defined as the excess of current assets over current liabilities.

It represents the day to day capital requirement to continue the operations of the organisation.

In very simple terms, it can be calculated as:

Stock

ADD: Trade debtors

LESS: (Trade creditors)

= Working capital

This working capital requirement has to be financed by borrowings, shareholders' funds, or a combination of both of them.

Working capital can be negative, for example in food retailing.

@@ Line 1: / Line 1: @@
-''Insolvency law''.
+Working capital is normally defined as the excess of current assets over current liabilities.
-Bankruptcy is a formal declaration of insolvency by a court.
+It represents the day to day capital requirement to continue the operations of the organisation.
-Bankruptcy can apply to businesses and to individuals.
-It provides a degree of protection for the debtor against its creditors, while also involving a loss of control by the debtor.
+In very simple terms, it can be calculated as:
+Stock
+ADD: Trade debtors
+LESS: (Trade creditors)
+= Working capital
+This working capital requirement has to be financed by borrowings, shareholders' funds, or a combination of both of them.
+Working capital can be negative, for example in food retailing.
 == See also ==
-* [[Administration]]
+* [[Capital]]
-* [[Bankruptcy Code]]
+* [[Cash flow statement]]
-* [[Examinership]]
+* [[Efficiency ratio]]
-* [[Going concern]]
+* [[Liquidity management]]
-* [[Insolvency]]
+* [[Over trading]]
-* [[Liquidation]]
+* [[Supply chain finance]]
-* [[Receivership]]
+* [[Working capital management]]
-[[Category:Accounting,_tax_and_regulation]]
-[[Category:Compliance_and_audit]]