GENERAL KNOWLEDGE

Detailed explanation-1: -Working capital is the money used to cover all of a company’s short-term expenses, which are due within one year. Working capital is the difference between a company’s current assets and current liabilities. Working capital is used to purchase inventory, pay short-term debt, and day-to-day operating expenses.

Detailed explanation-2: -What Is Working Capital? Working capital, also known as net working capital (NWC), is the difference between a company’s current assets-such as cash, accounts receivable/customers’ unpaid bills, and inventories of raw materials and finished goods-and its current liabilities, such as accounts payable and debts.

Detailed explanation-3: -While it can be tempting to use a working capital line of credit to purchase machinery or real estate or to hire permanent employees, these expenditures call for different kinds of financing. If you tie up your working capital line of credit on these expenses, it won’t be available for its intended purpose.

Detailed explanation-4: -Working capital is used to fund operations and meet short-term obligations. If a company has enough working capital, it can continue to pay its employees and suppliers and meet other obligations, such as interest payments and taxes, even if it runs into cash flow challenges.

Detailed explanation-5: -The raw materials and money in hand are known as working capital, which is used for the production of commodities. It is also called as current capital.