Question

what is known as working capital

Answer 1

Working capital is a measure of both a company's efficiency and its short-term financial health. Working capital is calculated as:

Working Capital = Current Assets - Current Liabilities

The working capital ratio (Current Assets/Current Liabilities) indicates whether a company has enough short term assets to cover its short term debt. Anything below 1 indicates negative W/C (working capital). While anything over 2 means that the company is not investing excess assets. Most believe that a ratio between 1.2 and 2.0 is sufficient. Also known as "net working capital".

Answer 2

Working capital means the cash available for day-to-day operations of an organization.


Working Capital = Existing Assets - Existing Liabilities of your business.


Hope this helps!