Working capital analysis
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This document analyzes the working capital of Company A and Company B. Company A has current assets of $100 and current liabilities of $90, giving it a working capital percentage of 111% and absolute working capital of $10. Company B has current assets of $30 and current liabilities of $20, giving it a working capital percentage of 150% and absolute working capital of $10. The conclusion is that while Company B appears financially healthier based on percentages, the absolute working capital numbers show both companies are equally attractive to investors.
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Working capital analysis
- 1. Working capital analysisBy Michael
- 3. Company ACompany A’s CA equal 100. Company A’s CL equals 90Working capital percentage equals 111%Absolute working capital equals 10
- 4. Company BCompany B’s CA equal 30. Company B’s CL equals 20Working capital percentage equals 150%Absolute working capital equals 10
- 5. ConclusionAs we can see first measure gives us ground for making appropriate decision that company B is financially healthier than company A. While absolute working capital measure tells us that both companies posses the same financial attractiveness and investor should be indifferent in choosing better one.