Working capital is crucial for Jane in the establishment of her new business because it indicates the company's ability to meet its short-term financial liabilities. Working capital, calculated as current assets minus current liabilities, reflects the liquidity of the business and its capacity to sustain daily operations.
Without sufficient working capital, Jane's business may struggle to pay suppliers, manage inventory, and cover operational expenses, which are essential for maintaining smooth business operations. Reference:
"Financial Management: Theory and Practice" by Eugene F. Brigham and Michael C. Ehrhardt discusses the importance of working capital in business finance.