Working Capital
In the world of finance, working capital is the lifeblood of a business. It is the financial space a company has to support its day-to-day operations and is a key element of healthy business operations.
What is working capital?
Working capital is the difference between a company's current assets and current liabilities. Current assets include cash, inventories, accounts receivable and other assets that are converted to cash within a year. Current liabilities are debts that must be repaid within the same time frame. A positive working capital indicates that a company has sufficient funds to meet its daily obligations, while a negative working capital can indicate financial difficulties. Working capital management is vital to prevent liquidity problems and ensure the smooth operation of a business. A good understanding of working capital enables companies to effectively manage their finances and achieve growth.
