Working Capital

Working capital is the amount of money that is available to a company to fund its day-to-day operations. It is a measure of a company's liquidity and its ability to meet its short-term obligations. In other words, working capital is the difference between a company's current assets and its current liabilities.

Current Assets

Current assets are assets that can be easily converted into cash within a year. Examples of current assets include:

- Cash and cash equivalents
- Accounts receivable
- Inventory
- Marketable securities
- Prepaid expenses

Current Liabilities

Current liabilities are obligations that a company is required to pay within a year. Examples of current liabilities include:

- Accounts payable
- Short-term loans
- Accrued expenses
- Taxes payable

Importance of Working Capital

Working capital is important because it allows a company to operate smoothly and efficiently. A company with inadequate working capital may struggle to pay its bills, meet payroll, and purchase inventory. On the other hand, a company with excess working capital may be able to take advantage of opportunities to invest in growth and expansion.

Managing Working Capital

Managing working capital is an important aspect of financial management. Companies can improve their working capital by:

- Reducing inventory levels
- Improving collections of accounts receivable
- Negotiating better payment terms with suppliers
- Reducing operating expenses
- Increasing sales and revenue

In conclusion, working capital is a crucial measure of a company's financial health and its ability to meet short-term obligations. Effective management of working capital is essential for the success of any business.

Working capital is the amount of a company's current assets minus the amount of its current liabilities.