Working Capital
The cash a business needs to fund day-to-day operations — current assets minus current liabilities.
What does working capital mean?
It covers the gap between paying for inventory and collecting from customers. Too little starves growth; too much is idle cash. The cash conversion cycle measures how long money is tied up.
Put it to use
Working Capital Needs Calculator Working capital essential to running your business. This calculator assists you in determining your working capital needs for the next year. Financial Ratios Calculator This calculator helps you to zero in on areas of your business that may need attention. Areas such as solvency, liquidity, operational efficiency and profitability.
Working Capital — frequently asked
How do I calculate working capital?
Subtract current liabilities from current assets. A company with $150,000 in current assets and $90,000 in current liabilities has $60,000 of working capital — the short-term cushion it uses to fund day-to-day operations.
Why does working capital matter?
It measures whether a business can cover its near-term obligations. Positive working capital signals healthy liquidity; a negative or shrinking figure can warn of cash-flow trouble even when the company is profitable on paper.