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No, working capital is not a direct measure of a company's profitability. Instead, it represents the difference between current assets and current liabilities, indicating a company's short-term financial health and liquidity. While sufficient working capital can support operations and indirectly contribute to profitability, it does not directly assess a company's overall profitability, which is typically measured by metrics like net income or return on equity.
What else can I help you with?
Example of working capital?
Working capital is a measure of a company's efficiency and its financial health. A measure of a companies efficiency is an example of working capital.
Is profitability of a firm an adequate measure of its efficiency?
to what extent does profitability of a firm measure its efficiency
What is the purpose of working capital?
Working capital is defined as "a measure of both a company's efficiency and its short-term financial health." It is a ratio calculated with this formula: current assets - current liabilities = working capital.
How do you calculate average working capital?
To calculate average working capital, first determine the working capital for each period by subtracting current liabilities from current assets. Then, sum the working capital figures for each period and divide by the number of periods to obtain the average. The formula can be expressed as: Average Working Capital = (Working Capital Period 1 + Working Capital Period 2 + ... + Working Capital Period N) / N. This provides a measure of the liquidity available to meet short-term obligations over the specified periods.
What is schedule of changes in working capital?
Working Capital is a measure of a company's short term liquidity or its ability to cover short term liabilities. Working capital is defined as the difference between a company's current assets and current liabilities.
Example of working capital?
Working capital is a measure of a company's efficiency and its financial health. A measure of a companies efficiency is an example of working capital.
Internal Rate of Return serves what purpose?
Internal Rate of Return is used in capital budgeting. Its primary purpose is to better measure the profitability of investments and to compare this profitability.
Is profitability of a firm an adequate measure of its efficiency?
to what extent does profitability of a firm measure its efficiency
What is the purpose of working capital?
Working capital is defined as "a measure of both a company's efficiency and its short-term financial health." It is a ratio calculated with this formula: current assets - current liabilities = working capital.
Would you expect net income to be a good measure of a company's liquidity?
Generally I would not use Net Income as a measure of liquidity. Net Income is a good measure of profitability, but it does not indicate a company's ability to meet short-term obligations. Some good measures of liquidity include working capital, the current ratio, and the quick ratio.
What do net sales to working capital show or measure?
It measures the effeciency of worling capital in producing enough sales.
How do you calculate average working capital?
To calculate average working capital, first determine the working capital for each period by subtracting current liabilities from current assets. Then, sum the working capital figures for each period and divide by the number of periods to obtain the average. The formula can be expressed as: Average Working Capital = (Working Capital Period 1 + Working Capital Period 2 + ... + Working Capital Period N) / N. This provides a measure of the liquidity available to meet short-term obligations over the specified periods.
What is schedule of changes in working capital?
Working Capital is a measure of a company's short term liquidity or its ability to cover short term liabilities. Working capital is defined as the difference between a company's current assets and current liabilities.
A measure of profitability is the?
current retio
What is a measure of profitability?
earnings per share
What two ratios measure factors that affect profitability?
what tw ratios measure factors
Is a working capital current liability?
Working capital is not a current liability; rather, it is a measure of a company's short-term financial health. It is calculated as current assets minus current liabilities. While current liabilities are part of the equation that determines working capital, they themselves represent the obligations a company needs to settle within a year, whereas working capital indicates the liquidity available to meet those obligations.
