zero working capital

Presented By: Kishor Pandilwar - 51

Working capital is current assets minus current liabilities.

It represents the liquid assets available with the company to meet its current obligations.

In financial terms, zero working capital is the state where the total accounts receivable, accounts payable, and inventory is zero. Inventory + Account Receivables – Accounts Payables = 0.

Zero working capital tries to minimize the working capital deployed in the cash conversion cycle to the extent possible, and if possible, continuing the process without any working capital at all.

Generates not only cash but also speeds up production and efficiency

Inventories financed by suppliers Demand based management – JIT Some companies are now driving working

capital to record low levels, so-called Zero Working Capital. By keeping working capital at zero, funds are released for many other opportunities.

Companies such as Dell, General Electric, and Campbell Soup have implemented zero working capital to improve their financials.

The shift of zero working capital becomes easy when the company's products are in high demand, there are few competing products, and when the company commands a demanding position in the supply chain, with suppliers valuing the company's order.

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