Working Capital

Working capital is a measure to assess a firm’s liquidity position. It is calculated as current assets minus liabilities. Working capital (also known as operating capital) is required for the smooth running of a business. A decrease in working capital translates into less money to settle short-term debt. Working capital can be expressed as a positive or negative number. When a company has more debt than current assets, it has negative working capital. When current assets outweigh debt, a company has positive working capital.

Leave a Reply