Q.Explain the following term/concept.
Working capital

Working capital is the amount of funds a company needs to carry on its routine, day-to-day business activities. It is the excess of current assets over current liabilities.

Working capital keeps the regular business cycle running — it is used to purchase raw materials, pay wages and salaries, meet overhead and other short-term expenses, and hold stock until goods are sold and cash is realised. It is also called circulating capital because it keeps changing form: cash becomes raw material, then finished goods, then debtors, and finally cash again.

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