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Answer:
Working capital, also known as net working capital (NWC), is the difference between a company’s current assets and current liabilities, such as cash, accounts receivable/unpaid invoices from customers, and raw materials and completed goods inventories.
The Net Working Capital (NWC) of a corporation is a measure of its liquidity, operational efficiency, and short-term financial health. If a company has a significant positive NWC, it should be able to invest and grow. If a company’s current assets do not meet its current liabilities, it may face difficulties in expanding or repaying creditors. It may even declare bankruptcy.
If a company’s current asset to liability ratio is less than one, it has a negative net worth.
A positive NWC suggests that a business can fund its current operations while also investing in future activities and expansion.
