Working capital is a financial metric that measures a company’s short-term liquidity, operational efficiency, and financial health. It is the difference between current assets (like cash, inventory, and receivables) and current liabilities (such as payables and short-term debts). Sufficient working capital is crucial for daily operations, ensuring a company can meet its short-term obligations while maintaining smooth operations. It plays a pivotal role in the day-to-day functioning of businesses by ensuring the availability of funds for routine activities like purchasing inventory, paying salaries, and covering other operational expenses.