Question

Why Working capital management is important? Explain briefly.

Answer 1

Working Capital is difference between Current Assets (cash, accounts receivable and inventories of raw materials and finished goods) and Current Liabilities (accounts payable.

Proper management of working capital is essential to a company's financial health and operational success as a business. The working capital ratio, which divides current assets by current liabilities, indicates whether a company has adequate cash flow to cover short-term debts and expenses.