Question

If volume of sales increase amount of working capital

Answer 1

Answer:

In business accounting, working capital is a benchmark measure of your company's ability to meet its short-term obligations. It's calculated by taking your business' current assets and subtracting its current liabilities. Current assets are those that can or will be converted to cash in the next year. The major current assets are cash, accounts receivable and inventory. Current liabilities are obligations that must be fulfilled within the next year. For a typical company, the major current liabilities are accounts payable, accrued liabilities (such as wages earned by workers but not yet paid, or rent expenses incurred but not paid), and debt payments. When current assets exceed current liabilities, a company has positive working capital. That's good. When it's the other way around, the company has negative working capital. That's bad.