What does the working capital of an enterprise mean?

The amount of working capital of an enterprise refers to the total amount of funds used by the enterprise to maintain normal business activities. These funds are mainly used to pay various recurrent operating expenses, such as staff salaries, rent, utilities and so on. And help enterprises cope with sudden capital needs, such as investment activities and expansion plans. The amount of working capital of an enterprise directly reflects the company's stability and development ability.

For enterprises, the amount of working capital is an important indicator to ensure the normal supply of products and services. If the amount of working capital of an enterprise is insufficient, the quality of products and services will decline, and the remuneration of suppliers and employees will not be paid on time, which will eventually lead to difficulties in the survival and development of the enterprise. Therefore, enterprises must pay attention to managing the amount of working capital to ensure that it can meet the needs of daily operations.

The amount of working capital of an enterprise not only directly reflects the health of the enterprise, but also is the main index for financial institutions such as banks to evaluate the credit rating of the enterprise. When applying for a loan, the bank will evaluate the borrowing ability and repayment ability of the enterprise according to the amount of the enterprise's liquidity, so the increase of the enterprise's liquidity is not only related to the healthy development of the enterprise itself, but also related to its competitive advantage in financing.