What dose working capital means

Question

Accepted Answer

Working capital refers to the funds available for a company's day-to-day operations and is calculated by subtracting current liabilities from current assets.

Working capital is a measure of a company's liquidity and ability to meet short-term obligations.
It represents the difference between a company's current assets (such as cash, inventory, accounts receivable) and its current liabilities (such as accounts payable, short-term debt).
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.
Working capital management involves optimizing the balance between current assets and liabilities to ensure efficient cash flow and financial stability.
For example, if a company has $500,000 in current assets and $300,000 in current liabilities, its working capital would be $200,000.

Accepted Answer

Working capital is the amount you get after deducting current liabilities from current assets. It tells us how much cash is tied up in the business through inventories and receivable and how much cash need to pay for the business short term obligation.

What dose working capital means

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