Question

Explain what working capital is and why it is important for a business. As an example, describe a business that operates in Maldives and describe how knowing what the working capital of that company would be useful to the business leaders of that company and to outside investors.

Answer 1

Working capital in business are considered as funds available to meet short-term obiligations. Working capital is also helpful in day-to-day operations.
Working capital is considered as a most important part of business and investors at very first will look at it, to assess business financial condition.

Formula to find out working capital is current assets minus current liabilities.

Working capital is the health of business and the business will always want to have a positive working capital.

For example motorbike business in Maldives we have a working capital, which would be used by investors and company itself to see weather the business is performing well ornot.

Working capital describe the health and the ability of business to meet any short-term obiligations.

Business laeaders uses working capital to improve the workings and efficiency of such business.