Finance
What is Working capital?
Working capital is the money a business has available for day-to-day operations — its current assets (like cash and inventory) minus its current liabilities (like bills due soon). Positive working capital means it can comfortably cover short-term needs.
See it, don’t just read it.
Watch a 2-minute lesson with voice + animation that explains working capital.
Key things to understand
- 1It's current assets minus current liabilities.
- 2It funds everyday operations like payroll and supplies.
- 3Positive working capital signals short-term health.
- 4Too little can cause cash crunches even if profitable.
Frequently asked questions
- What is working capital?
- The funds available for daily operations: current assets minus current liabilities.
- Why is working capital important?
- It shows whether a business can cover its short-term bills and keep running smoothly.
- Can a profitable company run out of working capital?
- Yes — if cash is tied up in inventory or unpaid invoices, it can struggle to pay bills on time.