Close out 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: @@
-''Derivative instruments - early termination''.
+Working capital is normally defined as the excess of current assets over current liabilities.
-Close out is the early termination of an obligation under a derivative instrument, before the normal final maturity.
+It represents the day to day capital requirement to continue the operations of the organisation.
-For example, for a futures contract this means taking a second offsetting position in order to remove the delivery obligation.
+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 ==
-* [[Futures]]
+* [[Capital]]
-* [[ICE Swap Rate]]
+* [[Cash flow statement]]
+* [[Efficiency ratio]]
-[[Category:Manage_risks]]
+* [[Liquidity management]]
-[[Category:Risk_frameworks]]
+* [[Over trading]]
+* [[Supply chain finance]]
+* [[Working capital management]]