The concept of working capital is quite simple. It is nothing but the amount of finance your business requires to operate the day-to-day expenses. One can calculate the business's working capital by subtracting the current liabilities from the total current assets of the business.

Once you know your working capital, you can group anything that you can convert into cash within one year of the business cycle under the current asset category. Simultaneously, the dues you have to look forward to during the current financial year would be segmented as current liabilities. 

With the shortage of working capital, it would be very difficult for the business to sustain itself. However, an excess of working capital can harm the business. It entails that the business sits on idle cash that one could generate to get better returns elsewhere. Due to such caveats, the business often struggles between balancing too much cash and too little finance when the question of working capital arises.

If one can automatically control the business's working capital, then the business would run smoothly and grow step by step. Suppose the business continuously faces a shortage of working capital, then it must keep an excessive cash buffer only to meet all the unplanned operational expenses. It is time to look thoroughly into the business's cash flow while accessing the various working capital financing. It would help plug the invested surplus cash and deficits at a higher return.