Working capital is the difference between the current assets and the current liabilities of a company. In simple words, it is the funds available to a business for its day-to-day operations. Auditors and managers use this financial metric to evaluate the short-term financial health of a business. Read along to learn different aspects of working capital like its meaning, types, formula, and examples. Working capital is basically the money a business has left after paying off what it owes in the short term. It’s calculated as: Working Capital = Current Assets – Current Liabilities. Think of it as a quick health check for your business’s finances. Working capital, also known as net working capital (NWC), is the amount of money a company has available to operate after deducting its current liabilities from its current assets. Working Capital: Definition The term working capital refers to the portion of total capital that is used to run a business efficiently and regularly. It is also known as short-term capital, circulating capital, or liquid capital. Working capital can also be viewed as the current assets minus the current liabilities of an organization. It is also known as the net current assets. Working Capital: Explanation Working capital, in other words, means management of current assets: namely, cash in ...
