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What is working capital?

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Quick answer

Working capital is the money a business has available for day-to-day operations — its current assets (like cash and inventory) minus its current liabilities (like bills due soon). Positive working capital means it can comfortably cover short-term needs. It's current assets minus current liabilities.

Key things to understand

  1. It's current assets minus current liabilities.
  2. It funds everyday operations like payroll and supplies.
  3. Positive working capital signals short-term health.
  4. Too little can cause cash crunches even if profitable.

People also ask

What is working capital?
The funds available for daily operations: current assets minus current liabilities.
Why is working capital important?
It shows whether a business can cover its short-term bills and keep running smoothly.
Can a profitable company run out of working capital?
Yes — if cash is tied up in inventory or unpaid invoices, it can struggle to pay bills on time.