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    Hedging Principle - Working Capital

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    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

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    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 ...

    Solution Summary

    This solution explains how to determine an appropriate level of working capital based on the hedging principle.