which capital is known as working capital
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Explanation:
The capital that is required for operating business, organisation or other entity, including governmental entities, or the capital that is used in day-to-day trading operations, which is calculated as the current assets minus the current liabilities, is known as working capital.
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WORKING CAPITAL is defined as the funds which are used in the day to day business operations of a company.
The efficient management of working capital is important for both, the profitability and the financial health of the company.
In layman’s term, every company needs a cash reserve to manage their daily running cost and that is known as the Working Capital.
Working capital is calculated as:
Working Capital = Current Assets - Current Liabilities
- Current Assets → Inventory, cash, and account receivables
- Current Liabilities → Account Payables And Short Term Loans
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