Working capital formula

Working capital formula: working capital = total current assets - total current liabilities. Working capital, also known as the use of funds, foreign called working capital, is the total current assets of the joint venture minus the total current liabilities of the net amount, that is, in the business operation of the enterprise can be used and turnover of the net liquidity.

Based on the formula for calculating working capital, it can be seen that changes in current assets and current liabilities will cause changes in working capital. If current liabilities remain unchanged, an increase in current assets indicates an increase in working capital, and a decrease in current assets indicates a decrease in working capital. If current assets remain constant, an increase in current liabilities indicates a decrease in working capital, and a decrease in current liabilities indicates an increase in working capital. If both changes at the same time, then only the net amount after the two offset is the net increase or decrease in working capital.