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Grateful. What an explanation. Finally I found sense. You are the only one who made overall sense finally. Thank thanks thanks. Outstanding tutor indeed.
Sir, Do banks have working capital? How does the concept of Working Capital apply to a bank? Is the Liquidity Coverage Ratio (LCR) the same as Current Ratio/Working Capital Ratio? It is difficult to calculate the working capital of a bank because a bank's balance sheet does not include typical current assets and liabilities.
Hey Shivasai, sorry for the delayed response here. It's not that you are using money to 'cover' A/R. But rather, that when you make a sale and the customer doesn't pay, then the Cash from that sale is 'locked up' / 'used' until the Customer pays.
Hi there, we are simply assuming that NWC grows/declines in proportion to Revenue. This is a bit of a simplification to make the concept more clear, but broadly speaking as a Business grows, the various components of working capital will likely grow roughly in proportion to the Revenue of the Business. Clearly though, you will find many exceptions to this in a real life Business.
You’re not entirely wrong here. However, in order to acquire assets, you have to put out money in most cases. And so if you can manage the liabilities appropriately, they can actually pre-fund the purchase of some assets. Check out our negative net working capital video for more on this
When you say net assets say for instance I started a print on demand business and there's a certain amount of quantity that are available for sale per product does that count
Sorry if my english is not good, but i want to ask a question, do the equation of non cash current asset minus current liabilities include on that both interest bearing and not interest bearing current liabilities?
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The plain English thing along with the Business owner interpretation is what made this video stand out
We really try to make our videos as clear and practical as possible. Glad you found this helpful!
I am from India. Preparing for CA inter. I like practical explanation
Excellent . Thank you!!!
Amazing way to explain this tricky topic!! Thank you
Great video! Thank you so much.
Great job! You're doing something very different to everyone else with these very intuitive explanations. Fantastic!
Glad you found this helpful!
Grateful. What an explanation. Finally I found sense. You are the only one who made overall sense finally. Thank thanks thanks. Outstanding tutor indeed.
Really glad you found it helpful!
Such a detailed and simple explanation! Thank you !
Glad you liked it!
thanks to you I understood NWC and cash flows. really appreciated the time you spent in this
Glad to hear that!
Perfect preparation for my interview! Thanks a lot
Glad it was helpful!
You should be replacing my teachers....and as a student...I feel you are God sent
what a legend. Thanks for existing🙏
Thanks so much! Glad it was helpful!
Absolutely perfect, nailed it down to the main idea in a few minutes!
Glad you found it helpful!
Very coherent and intelligible, well explained. Thank you!
Glad it was helpful!
This was so helpful. Thanks man!
Glad you found it helpful!
Brilliant video. The explanation you provided is much greater than the university education I'm paying $1,000's/year for.
Thank you for the kind words Bruce!
well explained! Thank you for sharing the video
Thanks so much and glad it was helpful!
Super helpful many thanks
Glad to hear it!
Excellent explanation of NWC!
Thank you kindly!
Maybe I’m confused, but why do you have a need for cash for accounts receivable?
You should create a book explaining finance/businesses formulas!
Really appreciate the suggestion. That would actually be a lot of fun!
Very well explained!
Glad it was helpful!
Nicely explained
Thank you so much 🙂
Great info!
Glad it was helpful!
Sir,
Do banks have working capital?
How does the concept of Working Capital apply to a bank?
Is the Liquidity Coverage Ratio (LCR) the same as Current Ratio/Working Capital Ratio?
It is difficult to calculate the working capital of a bank because a bank's balance sheet does not include typical current assets and liabilities.
Great Video. Why do you need money to cover your A/R? That is money that is owed to us
Hey Shivasai, sorry for the delayed response here. It's not that you are using money to 'cover' A/R. But rather, that when you make a sale and the customer doesn't pay, then the Cash from that sale is 'locked up' / 'used' until the Customer pays.
Solid video
Thanks Jacob!
Outstanding!
Thank you! Glad it was helpful!
How come sometimes inventory is a liability but sometimes its an asset?
thanks from saudi
Welcome
I did not understand how assets and liabilities got doubled when you doubled the revenue, can you explain that? thanks for answering .
Hi there, we are simply assuming that NWC grows/declines in proportion to Revenue. This is a bit of a simplification to make the concept more clear, but broadly speaking as a Business grows, the various components of working capital will likely grow roughly in proportion to the Revenue of the Business. Clearly though, you will find many exceptions to this in a real life Business.
I thought having more assets than liabilities is a good thing no?
You’re not entirely wrong here. However, in order to acquire assets, you have to put out money in most cases. And so if you can manage the liabilities appropriately, they can actually pre-fund the purchase of some assets. Check out our negative net working capital video for more on this
When you say net assets say for instance I started a print on demand business and there's a certain amount of quantity that are available for sale per product does that count
Sorry if my english is not good, but i want to ask a question, do the equation of non cash current asset minus current liabilities include on that both interest bearing and not interest bearing current liabilities?
Hi there, we generally exclude any 'interest bearing' items when calculating Working Capital.
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