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Definition and Examples of

Working Capital

Expanded Explanation: Working capital is crucial for day-to-day operations, as it’s used to pay for ongoing operating expenses and short-term liabilities. Effective working capital management ensures operational efficiency and financial stability.

Potential Issues: Inadequate working capital can hinder a business’s ability to operate effectively, leading to difficulties in maintaining inventory, paying suppliers, and managing other short-term obligations.

Example: If your artisan jewelry store has $15,000 in current assets and $10,000 in current liabilities, your working capital is $5,000.

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