Working capital refers to the amount of money a company has available to cover its day-to-day operations, including its expenses and short-term debts. In other words, it is the difference between a company’s current assets and its current liabilities. Current assets include cash, inventory, and accounts receivable, while current liabilities include accounts payable, short-term loans, and other debts due within one year.

Benefits of working capital:

1. Ensures smooth operations: Working capital ensures that a company has enough funds to cover its daily operations, such as paying bills and salaries, purchasing inventory, and investing in marketing campaigns.

2. Facilitates growth: With adequate working capital, a company can invest in new equipment, hire additional staff, expand its operations, or launch new products or services.

3. Improves creditworthiness: Maintaining adequate working capital helps a company demonstrate its financial stability and reliability, which can improve its creditworthiness and increase its access to financing.

Features of working capital:

1. Short-term focus: Working capital focuses on a company’s short-term financial health and ability to meet its immediate obligations.

2. Dynamic nature: Working capital levels can fluctuate depending on a variety of factors, such as changes in sales volume, inventory levels, and accounts receivable and payable.

3. Management: Effective management of working capital is critical for business success. This includes monitoring cash flow, optimizing inventory levels, and managing accounts receivable and payable.