Working Capital

sudhashbahu · #1 18th January 2010, 05:31 PM

Is "Net Current Assets" as displayed on Moneycontrol a good representation of "Working Capital"?

Alchemist · #2 18th January 2010, 05:40 PM

"Net Current Assets" and "Working Capital" are same.

Quote:

Net Current Assets

Current assets minus current liabilities. This amount indicates how much capital is being generated or used up by day-to-day activities. If net current assets are negative, the company may have difficulty financing its day-to-day operations. also called working capital or current capital.

http://www.investorwords.com/3242/ne...nt_assets.html

Quote:

Working Capital

A high level of working capital indicates significant liquidity. Also called net current assets, net working capital.

http://financial-dictionary.thefreed...orking+capital

Quote:

The phrase net current assets (also called working capital) is often used and refers to the total of current assets less the total of current liabilities.

http://en.wikipedia.org/wiki/Asset#Current_assets

sudhashbahu · #3 18th January 2010, 06:29 PM

Thanks Alchemist,

My follow up questions:

1. How much importance should one attach to the metric "Return on Working Capital" (ROWC)

2. How should it be calculated?

Net Profit for year Y from Year Y PL account
= ----------------------------------------
Working Capital from Year Y balance sheet

or should we adjust the profit and or use averages?

As an exercise I compared TCD and INFY. TCS ROWC is 1.119 and for INFY is 0.469