Write the meaning of working capital.

Working capital refers to the difference between a business’s current assets and its current liabilities. It represents the liquid resources available to a company for its day-to-day operations and short-term financial obligations.

Mathematically, it is calculated as: Working Capital = Current Assets – Current Liabilities

Current assets include cash, accounts receivable, inventory, and prepaid expenses, while current liabilities encompass short-term debts, accounts payable, and accrued expenses. A positive working capital indicates that a company can comfortably meet its short-term obligations, whereas a negative working capital suggests potential liquidity issues. Efficient management of working capital ensures smooth business operations and financial stability.