What is working capital, and how do you forecast it?
Working Capital refers to a specific subset of balance sheet items and is calculated by subtracting current liabilities from current assets.
Working capital forecasting is based on the overall financial requirements and financial policies of the concern. The basic objective of working capital forecasting is either to measure the cash position of the concern or to exercise control over the liquidity position of the concern. The first-principles approach to forecasting working capital typically involves forecasting individual current assets and current liabilities using various working capital ratios, such as receivable days, inventory days, and payable days