Brief Definition
Working capital is a financial metric that represents the difference between a company’s current assets and current liabilities.
Further Explanation
Working capital is a financial metric that represents the difference between a company’s current assets and current liabilities. It is used to measure a company’s short-term liquidity and operational efficiency. Positive working capital indicates that a company can cover its short-term liabilities with its short-term assets, which is essential for maintaining smooth business operations.
Example:
Company X’s working capital is $170,000, indicating it has sufficient short-term assets to cover its short-term liabilities and operate smoothly.