Working capital

Working capital,

Definition of Working capital:

  1. Accounting: Net liquid assets computed by deducting current liabilities from current assets. The amount of available working capital is a measure of a firms ability to meet its short-term obligations. Sources of working capital are (1) net income, (2) long-term loans, (3) sale of capital assets, and (4) injection of funds by stockholders. Ample working capital allows management to take advantage of unexpected opportunities, and to qualify for bank loans and favorable trade credit terms. In the normal trade cycle of a company, working capital equals working assets. Also called net current assets.

  2. The cash available for day-to-day operations of an organization. Strictly speaking, one borrows cash (and not working capital) to be able to buy assets or to pay for obligations. Also called current capital.

How to use Working capital in a sentence?

  1. Steve had enough future investors for his company, but he didnt have enough working capital to cover his day to day expenses.
  2. Despite the crisis, company officials vow to continue funding day-to-day operations only through working capital and not to dip into any reserve funds or special monies, but shareholders are unconvinced.
  3. The store owners two-part goal was to pay off his debt as quickly as possible while maintaining sufficient working capital to comfortably manage his business.

Meaning of Working capital & Working capital Definition