Question

what is meaning of working capital

Answer 1

Heya !!

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 is the money provided to a particular company for day-to-day operations


WHAT IT IS:

Working capital is money available to a company for day-to-day operations.
 
The formula for working capital is:

Current Assets - Current Liabilities

HOW IT WORKS (EXAMPLE):

Here is some balance sheet information about XYZ Company:

Using the working capital formula and the information above from Figure 1, we can calculate that

WHY IT MATTERS:

Working capital is a common measure of a company's liquidity, efficiency, and overall health. Because it includes cash, inventory, accounts receivable, accounts payable, the portion of debt due within one year, and other short-term accounts, a company's working capital reflects the results of a host of company activities, including inventory management, debt management, revenue collection, and payments to suppliers.

Positive working capital generally indicates that a company is able to pay off its short-term liabilities almost immediately. Negative working capital generally indicates a company is unable to do so.