... that credit. * Metrics that will be used to monitor performance against the policy. Working Capital Policy Working capital is calculated as current assets minus current liabilities (Wikipedia, 2007). Working capital is also known as operating capital. A most important value, it represents the amount of day-by-day operating liquidity available to a business. A company can be endowed with assets and profitability, but short of liquidity if these assets cannot readily be converted into cash. Any change in the working capital has an effect on the cash flow into or away from a business (Wikipedia, 2007). A positive change in working capital means that the business has pumped in cash for inventory. Consequently, an increase in working capital has a negative effect on cash flow. However, a negative change in working capital will mean lower funds to pay off short term liabilities which will have bad repercussions to the future of ...

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