Working Capital
Working capital refers to the amount of money that a company uses in its day-to-day operations. It is essential for a business to have adequate working capital to ensure smooth operations and meet short-term financial obligations.

Importance of Working Capital
- Smooth Operations: Sufficient working capital ensures that a company can pay for day-to-day expenses such as rent, salaries, and utilities.
- Meeting Short-term Obligations: Working capital helps a business meet its short-term financial obligations, such as paying suppliers and creditors on time.
- Opportunity for Growth: With adequate working capital, a company can take advantage of business opportunities, such as purchasing inventory at discounted prices or expanding operations.

Calculation of Working Capital
Working capital is calculated by subtracting current liabilities from current assets. Current assets include cash, accounts receivable, and inventory, while current liabilities include accounts payable and short-term debt.

Signs of Inadequate Working Capital
- Cash Flow Issues: If a company is struggling to pay its bills on time or experiencing frequent cash flow problems, it may indicate inadequate working capital.
- Difficulty in Expanding: A lack of working capital can hinder a company's ability to invest in growth opportunities or expand its operations.
- Increased Borrowing: Companies with insufficient working capital may have to rely on borrowing to meet their financial obligations, leading to increased debt.
In conclusion, working capital is crucial for the financial health of a business. It enables companies to operate smoothly, meet short-term obligations, and seize growth opportunities. Monitoring and managing working capital effectively is essential for the long-term success of a company.