What’s the difference between positive and negative working capital?

Positive working capital means you have enough liquidity to pay your current bills. Negative working capital means you have more bills than you have cash to pay and may need to get a loan to pay your debts.

How is working capital related to profitability?

Working capital relates to profitability because more profitable businesses tend to have more working capital. Inadequate working capital can reduce profitability by forcing a company to borrow money to cover cash flow issues.

Can working capital be used to pay long-term debt?

Yes, you can use working capital to pay off long-term debt. You can also use it for other long-term investments. However, you need to balance short-term cash needs with long-term investments.

What are the best strategies for working capital management?

About the Author

TJ Porter

TJ Porter

Personal Finance Writer

I have in-depth experience in reviewing financial products such as savings accounts, credit cards, and brokerages, writing how-tos, and answering financial questions both simple and complicated.

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