In order to carry on the business, the company has to plan for future needs and also meet its day-to-day expenses, such as payrolls or paying for raw materials, tools, and supplies. To meet these expenses the company requires cash.

Therefore, the funds that are required by a company to meet its short-term expenses (within 1 year) are known as ‘Working Capital’.

Working Capital meaning is the cash required to meet the company’s short-term expenses.