Working Capital

Working Capital (Definition)

Working capital is the difference between a companys current assets and current liabilities.

Key aspects of working capital include:

1. Represents a companys short-term financial health
2. Positive working capital indicates ability to cover short-term obligations
3. Calculated as current assets minus current liabilities
4. Important for assessing liquidity and operational efficiency
5. Can be managed through inventory control, accounts receivable, and accounts payable policies
6. Too little working capital may indicate financial distress, while too much may suggest inefficiency
7. Understanding working capital is crucial for managing cash flow and short-term finances

Effective management of working capital is essential for maintaining business operations and financial stability.