Working Capital Definition

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

Working Capital Extended Definition
Working Capital is the money used to pay short-term debts. Working capital is calculated by subtracting current assets from liabilities. Assets must be readily available to be turned into cash (if not cash itself) to cover current liabilities.

Working capital can show the overall financial health of a small business. Positive working capital shows a business is readily able to pay off short-term liabilities. Negative working capital may indicate financial problems such as slow sales or collection problems.

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Last Updated By

Rachel Blakely-Gray | Apr 18, 2023