Working capital is the money businesses use to pay their bills each day. Working capital does not include money used to buy fixed assets (machinery and equipment). Money used to buy fixed assets is called capital expenditure. Working capital is used to pay for things like:
Businesses need to ensure that they have enough money or liquidity to pay for their daily bills. If a business does not have sufficient liquidity it may face eviction, utilities being cut off, no stock and loss of reputation.