What is Working Capital?

Working capital is a financial metric that measures a company's short-term liquidity and financial health. It is calculated by subtracting a company's current liabilities from its current assets.

Current assets include cash and other assets that can be easily converted into cash within one year or less, such as accounts receivable and inventory.

Current liabilities are obligations that are due within one year or less, such as accounts payable and short-term debt.

A company with a positive working capital is considered to be financially healthy, as it indicates that the company has sufficient liquid assets to cover its short-term debts and obligations. A company with a negative working capital, on the other hand, may struggle to meet its short-term financial commitments and may need to borrow money or sell assets to meet them.

Working capital is an important factor in business cases for companies to consider when managing their short-term financial needs, and it is closely monitored by investors and creditors as a measure of a company's financial stability.

Working Capital is one of the features of the Financial Analysis Templates.