Definition of Working capital:
Accounting: Net liquidity is calculated by deducting short-term liabilities from short-term assets. The amount of business capital available is a measure of a company's ability to meet its short-term obligations. Sources of working capital are (1) net income, (2) long-term debt, (3) sale of fixed assets and (4) injection of capital. Proper working capital allows management to take advantage of unexpected opportunities and to take advantage of the terms of a profitable bank and commercial loan. In a company's normal business cycle, working capital is equal to the company's assets. It is also known as short term equity.
Funds are available for day-to-day organization management. In fact, you are borrowing money (not work capital) to buy assets or pay off bonds. It is also called working capital.
How to use Working capital in a sentence?
- Steve has enough future investors for his business, but he doesn't have enough business capital to cover his day-to-day expenses.
- Despite the crisis, company officials promised to continue the day-to-day financing with business capital alone and not to use special reserves or funds, but shareholders were not convinced.
- The dual purpose of a store keeper is to pay off his debts as soon as possible and at the same time get enough business capital to run his business smoothly.
Meaning of Working capital & Working capital Definition