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Working capital (abbreviated WC) is a financial metric which represents operating liquidity available to a business, organization or other entity, including governmental entity. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. Gross working capital equals to current assets. Working capital is calculated as current assets minus current liabilities.[1] If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit.
Working capital is a common measure of a company's liquidity and operational efficiency.
Lower the working capital requirement,the shorter the operating cycle & thus the higher the operational efficiency.
AGREE WITH MR BASIT ALI ANSWER
Operational efficiency cannot be achieved without completing the requirements of working capital like
-you cannot pay the salaries to employees
- You cannot purchase the Materials and Consumables
- No Maintenance of machineries and equipments
- Production cycles run breacks down
