The Goals of Working Capital

[Suba]

Working capital is the difference between current assets and current liabilities, so it is net working capital or the availability of funds of a company that will be used to fund business operational activities. Apart from that, working capital is also often used by investors to measure a company's ability to pay short-term debt. Working capital is also often referred to as an indicator of a company's short-term financial health. So in your opinion, what are the goals of working capital?

 

[Goldynn89]

Having worked with a new business myself, I have realized that it's important to plan for your source of working capital before you start. Expenses can come up unexpected and having some cash at hand will allow the business to expand whenever necessary without hindrance.

 

[Suba]

Having worked with a new business myself, I have realized that it's important to plan for your source of working capital before you start. Expenses can come up unexpected and having some cash at hand will allow the business to expand whenever necessary without hindrance.

That's right, one of the benefits or objectives of working capital is to measure the cash available to pay unexpected costs and smooth the running of business operations. So we also need some funds as reserve funds.