what is working capital?

[niyati]

Hi all,
I’ve been hearing a lot about “working capital” in business finance discussions.
Can someone explain in simple terms:

• What is working capital?
• How do you calculate it?
• Why is it important for day-to-day business operations?

Would love examples or insights on how companies manage their working capital effectively. Appreciate any tips or resources you can share!

 

[maria]

Working capital, also known as net working capital, represents the funds a company needs to cover its short-term operational expenses and obligations. It's essentially the difference between a company's current assets (like cash, accounts receivable, and inventory) and its current liabilities (like accounts payable and short-term debt).

 

[jainnorton]

Working capital is the difference between a company's current assets (like cash, inventory, receivables) and current liabilities (like payables, short-term debt). It shows the money available for day-to-day operations.

 

[alenaghose]

Working capital, also known as net working capital (NWC), represents a company's short-term financial health and its ability to meet its immediate obligations. It is calculated by subtracting current liabilities from current assets. Positive working capital indicates a company can cover its short-term debts and invest in operations

 

[ankita]

Working capital is the difference between a company’s current assets (like cash, accounts receivable, and inventory) and current liabilities (such as accounts payable and short-term debts). It measures liquidity, efficiency, and short-term financial health, showing whether a business can meet its day-to-day operational expenses and obligations effectively.