What is the meaning of working capital definition

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What is the Meaning of Working Capital Definition?

Working capital is a financial measure that assesses a company’s ability to pay its short-term debts and obligations. It is calculated by subtracting current liabilities from current assets. A company’s working capital is an important indicator of its overall financial health and liquidity.

The working capital definition is simple: it is the amount of money that a company has available to pay its short-term debts and obligations. It is calculated by subtracting current liabilities from current assets. Current assets are assets that can be converted to cash within one year, such as cash, accounts receivable, inventory, and marketable securities. Current liabilities are debts and obligations that must be paid within one year, such as accounts payable, taxes payable, and short-term loans.

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A positive working capital means that a company has enough cash to pay its short-term debts and obligations. A negative working capital means that a company does not have enough cash to pay its short-term debts and obligations. A negative working capital can be a sign of financial distress and can lead to bankruptcy.

Working capital is an important indicator of a company’s financial health and liquidity. It is used by investors and creditors to assess a company’s ability to pay its short-term debts and obligations. A company with a positive working capital is more likely to be able to pay its debts and obligations on time and is more likely to be able to survive economic downturns.

The working capital definition is simple, but it is an important indicator of a company’s financial health and liquidity. It is used by investors and creditors to assess a company’s ability to pay its short-term debts and obligations. A company with a positive working capital is more likely to be able to pay its debts and obligations on time and is more likely to be able to survive economic downturns.

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