How can I determine an appropriate level of working capital for a firm using the hedging principle?© BrainMass Inc. brainmass.com June 3, 2020, 8:24 pm ad1c9bdddf
Working capital is the firm's total current assets used in operations.
Working capital = total current assets
These current assets include cash, marketable securities, prepaid expenses, accounts receivable, inventory, and other current assets. Working capital represents the liquid portion of the firm.
Use of working capital
Working capital provides the resources for the day to day operations of the firm.
Without cash, the firm cannot ...
This solution explains how to determine an appropriate level of working capital based on the hedging principle.