Working capital is a crucial aspect of a business's financial health and refers to the funds available for day-to-day operations. It represents the difference between current assets (such as cash, inventory, and accounts receivable) and current liabilities (such as accounts payable and short-term debt).

Working capital serves as a financial cushion that enables a business to cover its operational expenses, manage inventory, meet short-term obligations, and pursue growth opportunities. Sufficient working capital ensures smooth business operations, timely payment to suppliers, and the ability to seize favorable market conditions.

Insufficient working capital, on the other hand, can lead to cash flow challenges, missed opportunities, and potential business disruptions. Therefore, businesses need to carefully monitor and manage their working capital to maintain financial stability and support ongoing growth.