Question

(a) What is working capital? Why is it important?​

Answer 1

Working capital is just what it says – it is the money you have to work with to meet your short-term needs. It is important because it is a measure of a company’s ability to pay off short-term expenses or debts.

But on the other hand, too much working capital means that some assets are not being invested for the long-term, so they are not being put to good use in helping the company grow as much as possible.

Answer 2

It is important because it is a measure of a company's ability to pay off short-term expenses or debts. But on the other hand, too much working capital means that some assets are not being invested for the long-term, so they are not being put to good use in helping the company grow as much as possible.