Business & Sales

What Is Working Capital?

Working capital is the difference between a business’s current assets and current liabilities. It indicates whether the business has enough short-term resources, such as cash, receivables, and inventory, to cover obligations due within about a year.

Formula

Working capital = current assets − current liabilities. With 150,000 in current assets and 100,000 in current liabilities, working capital is 50,000.

Current Ratio

Current assets ÷ current liabilities expresses the same relationship as a ratio (1.5 in the example).

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🔗 Related Terms

Balance Sheet Accounts Receivable Accounts Payable Liquidity Inventory Turnover

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Last updated: September 29, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.