Finance Questions? Ask a Financial Expert for Answers ASAP
Thank you for your question. Please permit me to assist you with your concerns.A "net working capital" is an evaluation the company's efficiency and short-term financial health, and is calculated by subtracting current liabilities from current assets. A decrease signifies that the health of the company is potentially deteriorating and that there is less cash on hand for capital expenditures. This can be a potential red flag and can point to situations where the sales or services of the company are decreasing, which ends up affecting the net working capital.Good luck.
really. What does an increase mean?
Rehana,An increase in net working capital may mean that the company is not running in the most efficient manner possible, as collections may not be getting obtained properly, or that the company is providing more services, selling more goods, and is improving profitability.Good luck.