How to calculate availability?Calculation method
Posted: Tue Feb 11, 2025 8:42 am
The calculation of cash is done by deducting the working capital requirement from the working capital. These two concepts are essential for managing a company's expenses and for assessing the assets and liabilities in the balance sheet:
Working capital requirement (WCR) indicates the amount of money a company british student data needs to cover its operating expenses before collecting payments from customers;
Working capital (WC) corresponds to all the resources that the company has in the medium and long term in order to pay its various operating expenses, i.e. the needs determined by the WCR.
Amount of cash = working capital – working capital requirement
As a reminder, here is how to calculate working capital (WC) and working capital requirement (WCR) :
FR = Capital + Reserves + Long-term debts – Fixed assets
BFR = Stocks + Customer receivables – Supplier debts.
Interpretation of the result
The difference between working capital and working capital requirement therefore gives the amount of money the company has after deducting operating cycle financing.
If the result is positive : this means that the company has enough resources to cover its operating expenses, which leaves liquidity for other investments or to deal with unforeseen events. It can therefore invest to increase its turnover or deal with unforeseen events;
If the result is negative : this indicates that the working capital requirement exceeds the available resources. In this case, the company may have difficulty paying its operating expenses and could face a lack of liquidity, which would impact the balance sheet in an unfavorable way.
The amount of cash is therefore a key indicator of the company's financial situation and its available capital. A lot of tax information related to cash flow can be found directly in your professional tax area, here .
Working capital requirement (WCR) indicates the amount of money a company british student data needs to cover its operating expenses before collecting payments from customers;
Working capital (WC) corresponds to all the resources that the company has in the medium and long term in order to pay its various operating expenses, i.e. the needs determined by the WCR.
Amount of cash = working capital – working capital requirement
As a reminder, here is how to calculate working capital (WC) and working capital requirement (WCR) :
FR = Capital + Reserves + Long-term debts – Fixed assets
BFR = Stocks + Customer receivables – Supplier debts.
Interpretation of the result
The difference between working capital and working capital requirement therefore gives the amount of money the company has after deducting operating cycle financing.
If the result is positive : this means that the company has enough resources to cover its operating expenses, which leaves liquidity for other investments or to deal with unforeseen events. It can therefore invest to increase its turnover or deal with unforeseen events;
If the result is negative : this indicates that the working capital requirement exceeds the available resources. In this case, the company may have difficulty paying its operating expenses and could face a lack of liquidity, which would impact the balance sheet in an unfavorable way.
The amount of cash is therefore a key indicator of the company's financial situation and its available capital. A lot of tax information related to cash flow can be found directly in your professional tax area, here .