What is WC and how does it work in day-to-day Business?

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Accepted Answer

WC stands for Working Capital and it refers to the funds a business needs to operate on a day-to-day basis.

Working Capital is the difference between a company's current assets and current liabilities.
It is used to finance the daily operations of a business, such as purchasing inventory, paying salaries, and covering short-term expenses.
Positive working capital indicates that a company has enough assets to cover its short-term liabilities, while negative working capital suggests a potential liquidity problem.
Managing working capital effectively is crucial for maintaining a healthy cash flow and ensuring the smooth functioning of the business.
For example, if a company has $100,000 in current assets (cash, accounts receivable, inventory) and $80,000 in current liabilities (accounts payable, short-term debt), its working capital would be $20,000.

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