Q.What is Working Capital ?

Working capital is the excess of current assets over current liabilities — the funds available for the day-to-day running of a business.

Explanation (for 2 marks):

• Meaning: Working capital is the part of a firm's capital used to finance its current (day-to-day) operations — buying stock, paying wages and expenses, and carrying debtors, etc.
• Formula:

where current assets include cash, bank, debtors, bills receivable, stock and prepaid expenses, and current liabilities include creditors, bills payable, outstanding expenses and bank overdraft. …