Working capital is the excess of current assets over current liabilities. It is, therefore, the part of current assets that is financed with long-term debt and permanent resources.
Generally speaking, a company should have a positive working capital to be able to meet its payments to suppliers and other obligations in the event of delays in collecting payment from its customers. However, if the working capital is excessive, the company will have resources that it is not making profitable, so it is important to have an adequate control of the working capital.
If the working capital is negative, the company may have difficulties in meeting its short-term financial commitments.
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