Working Capital Financing Glossary

Forms of Working Capital Financing

Within Working Capital Financing one can determine 5 different kinds of funding which can vary significantly. Within the science of Finance there are 5 basic forms of funding:
1) Line of Credit
2) Accounts Receivables Loan
3) Factoring
4) Inventory Loan
5) Term Loan

Net Working Capital

Net Working Capital describes the amount of assets, which are available on short-term-basis to generate turnover. The figure is calculated by subtracting short-term liabilities and liquid funds of a company from its working assets. 

Types of Working Capital Financing

Within Working Capital Financing there are different types of financing which can vary according to company and sector. There are 5 basic types of financing:
1) Line of Credit
2) Accounts Receivables Loan
3) Factoring
4) Inventory Loan
5) Term Loan

Working Capital Calculation

Working Capital is the difference between a company's short-term assets and short-term liabilities. A positive Working Capital Value indicates that the company has enough working assets to pay short-term liabilities.

Working Capital Definition

Working Capital is the difference between current assets and short -term liabilities. A positive result  implies that part of the current assets are generated with long-term assets. A negative result implies that the current assets are insufficient to cover all short-term liabilities.

Working Capital Financing

The goal of Working Capital Financing is to supply a company with enough short-term assets to be able to pay short-term liabilities. This allows the enterprise to enhance entrepreneurial flexibility, especially in e-commerce related businesses.

Working Capital Management

The goal of Working Capital Management is to optimize the key performance indicator Working Capital. An ideal Working Capital ensures that enough liquid assets exist to pay outstanding short-term liabilities.

Working Capital Ratio

Working Capital Ratio 1 is the relation between current assets and short-term liabilities, which is expressed as a percentage.

Working Capital Ratio  = Current Assetes / Short-Term Liabilities * 100