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What is optimum working capital

Optimum working capital can be can be determined  only with reference to particular circumstances of a specific situation.

An optimum working capital is dependent upon the business situation as such and the nature and composition of various current assets.

A company having short conversion cycle like a vanaspati manufacturing company may have a     lower current ratio. On the other hand ,a company having longer conversation cycle like heavy equipment manufacturing company may have higher current ratio since it has to  carry  large inventories and debtors.

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