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April 29, 2009

How can working capital be improved?

Working capital can be improved by 1) earning profits, 2)  issuing common stock or preferred stock for cash, 3) replacing short-term debt with long-term debt, 4) selling long-term assets for cash, 5) settling short-term debts for less than the stated amounts, and 6) collecting more of the accounts receivables than was anticipated and then reducing the balance required in the current asset account Allowance for Doubtful Accounts.

I am sure there are additional ways to increase working capital. The concept is to increase the amount of current assets and/or to decrease the amount of current liabilities.

Learn more about Financial Ratios.

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9 Responses to “How can working capital be improved?”

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