What is the meaning of working capital in commerce

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Working capital is an important concept in the world of commerce. It is the difference between a company’s current assets and current liabilities. It is also known as the liquidity of a business. A company’s working capital is an indication of its financial health and its ability to meet short-term obligations.

In a nutshell, working capital is the amount of money a company has available to cover its short-term expenses. This includes the cost of goods sold, wages, rent, utilities, and other day-to-day expenses. A company’s working capital is a measure of its ability to pay its bills in the short-term.

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The working capital ratio is a measure of a company’s liquidity. It is calculated by dividing the company’s current assets by its current liabilities. A higher ratio indicates that the company has more liquidity and is better able to meet its short-term obligations. A lower ratio indicates that the company is less able to meet its obligations in the short-term.

Working capital is a key indicator of a company’s financial health. It is important for companies to maintain a healthy working capital ratio in order to remain competitive in the marketplace. Companies with a healthy working capital ratio are better able to meet their short-term obligations and are better positioned for long-term success.

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