working capital requirements are low when an organization has
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operational requirements permanent working capital it is the minimum amount of current assets
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high creditors.
Explanation:
- The Working Capital Requirement (WCR) is a financial statistic that depicts the amount of money required to pay for current operational expenditures, forthcoming ones, and debt repayments.
- In other words, it displays the sum of money required to cover the difference between supplier payments and consumer payments.
- Accounts receivable (measured through the DSO, for Days Sales Outstanding), inventory (measured through the DIO, for Days Inventory Outstanding), and accounts payable make up the main parts of the working capital demand formula (measured through the DPO, for Days Payable Outstanding).
- It makes sense to calculate the working capital need using the following equation: WCR = Inventory + Accounts Receivable - Accounts Payable.
- If the creditors are high (accounts payable is high) then the WCR will be low.
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