Plain-English definitions, reviewed by an independent investor
Working Capital
Working capital is the cash buffer from short-term assets minus short-term liabilities.
Working capital is the cash buffer from short-term assets minus short-term liabilities.
Working Capital = Current Assets − Current Liabilities
Why it matters
It shows whether a firm can pay its bills without scrambling.
Common confusion
Negative working capital is not always bad (some models run on it), but it signals tightness.
Frequently Asked Questions
Low working capital risk?
It can mean trouble meeting near-term obligations if sales slip.
Is more always better?
Too much can mean lazy cash not put to work.