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Waqas
ANSWERS: 3
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Current assets minus current liabilities. This technically is the excess short term capital the business has in order to operate on a day to day basis.
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I wish I'd had AB to help me with my homework....
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Every business needs to buy something before it can trade. Say you run a shop - you need to buy stuff to stock your shop before you sell it, hopefully at a profit. Working capital is the money you have to put out in order to get into a business. As well as stock, it would include such things as advance fees, recruitment and advertising costs. It does not include major capital goods such as the shop or heavy equipment. But if you don't have working capital (or credit), you may not be able to restock the shop once you have sold stuff, or pay the wage bill before your customers have paid you. Without Working Capital, a perfectly viable business can go bust.
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