Working Capital: Short-term vs Long-term Need

Working capital is typically required to meet the day-to-day operational needs of a company. However, the need can be long-lived or short-lived, depending on the payment terms of the drivers of working capital. 

In the next video, our faculty will help you understand whether the working capital is a short-term or long-term requirement for cash. 

In the video, you learnt to calculate the working capital of an organisation over different tenures of its operations and inferences that can be drawn through these calculations.

Key takeaways from the exercise performed in the video include:

• During the initial days of business, the working capital requirement is very high.

• Working capital is a long-term need for cash.

• The larger the working capital, the more the invested capital required.

• Large working capital requires higher profits to satisfy the return on the capital employed.

The next segment will summarise the key learnings from this session. 

Additional Reading:

• Is negative working capital good?  by Corporate Finance Institute