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Understanding the difference between debt and equity is crucial for anyone looking to invest or start a business. Debt refers to funds borrowed by a company or individual that must be repaid with interest over a predetermined period. On the other hand, equity entails selling ownership in a business in exchange for capital. Unlike debt, equity does not require repayment, but it involves sharing profits and decision-making with stakeholders. Both options have their pros and cons, and the choice between debt and equity financing depends on factors such as risk tolerance, financial goals, and the stage of the business. By understanding these distinctions, individuals can make informed decisions regarding their investment or financing strategies. Key differences between Debt and Equity Ownership vs. Borrowing: Equity: Ownership interest in a company, acquired by investors through purchasing shares. Shareholders become partial owners with a stake in the company's assets and earni...

Working capital is a fundamental concept in the realm of finance and business management, serving as a lifeline to keep an enterprise running smoothly. Working capital is a measure that reflects the liquidity and short-term financial health of a business. Understanding working capital is critical for companies of all sizes. This is because working capital directly impacts a company's ability to meet its day-to-day operational needs and weather the dynamic conditions of commerce. Meaning of Working Capital Working capital can be defined as the difference between a company's current assets and current liabilities. Current assets include cash, accounts receivable, and inventory, while current liabilities include short-term obligations such as accounts payable and short-term debt. In essence, working capital represents the capital that is actively used in the day-to-day operations of a company. Le’s see how to calculate working capital: Working Capital = (Current Assets – C...