What Exactly Does Working Capital Mean?
Working capital is actually a very simple concept. Working capital is something that is required by every single company to carry day to day activities. A healthy business will always have enough capacity to pay off all its liabilities with the help of its assets. If it has a ratio above one, it means that the assets of the company can actually be converted into cash at a much faster pace. If the ratio is higher, the company is more likely to honour the short-term liabilities and all the commitments to debts. Keep in mind that a higher ratio also means that the company can easily fund all of its operations. It will not have to depend on loans or anything else. If the company has more working capital, it…