Working capital, from the perspecti

Working capital, from the perspective of accounting, refers to the net amount of current assets and current liabilities. If current assets are equal to current liabilities, the funds occupied in current assets are financed by current liabilities; If the current assets are larger than the current liabilities, the corresponding "net current assets" should take a certain share of long-term liabilities or owner's equity as its capital source. Resources are limited, and capital, as a kind of social resources, is bound to be limited, so the shortage of working capital is understandable. However, the shortage of working capital must be controlled within a reasonable range. If it exceeds the acceptable limit, it will affect the normal operation of the enterprise. As the capital needed to maintain the daily production and operation of the enterprise, working capital is closely related to the production and operation activities of the enterprise. Insufficient working capital will directly affect the normal conduct of enterprise trading activities. The smaller the working capital, the greater the risk of failure to repay the debt. Therefore, the working capital status of an enterprise is not only very important to the internal management of the enterprise, but also a good indicator of the financial risk of the enterprise. It is generally believed that the balance of current assets minus current liabilities is negative, and it is considered that the enterprise does not have preliminary short-term solvency. If the working capital is too large and the liquidity is strong, it indicates that the asset utilization rate is not high. If the working capital is too small and the liquidity is poor, it indicates that there are many problems with current assets and great potential debt repayment pressure. Too little working capital indicates that fixed asset investment depends on short-term loans and other liquidity financing to a high extent, and may face certain difficulties in operation.