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Working Capital represents the operational liquidity available to a business, calculated as Current Assets minus Current Liabilities.
Net Working Capital measures the buffer a company possesses to meet day-to-day operational expenses, pay supplier bills, purchase raw materials, and disburse employee wages.
A positive working capital ensures smooth uninterrupted business operations, preventing supply chain halts.
Current Assets include Cash, Bank Balances, Receivables, Stock & Inventory. Current Liabilities include Trade Payables, Short-term Bank Loans, and Tax Liabilities.
Current Ratio of 1.33x to 2.0x. Indian banks use 1.33x as the minimum baseline for calculating Tandon Committee Nayak Committee Cash Credit limits.
Under the Nayak Committee guidelines, MSMEs are eligible for working capital credit limits equal to 20% of projected annual gross turnover.
Indian banks mandate a minimum Current Ratio of 1.33x for approving working capital limits and cash-credit (CC/OD) facilities.