working capital

Working Capital

A valuation metric that is calculated as current assets minus current liabilities.

Notes:

If a company's current assets do not exceed its current liabilities, then it may run into trouble paying back creditors that want their money quickly. The working capital ratio, which measures this ability to pay back creditors, is calculated as current assets divided by current liabilities.

See also: Current Assets, Current Liabilities, Working Capital Loan, Working Capital Turnover

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Working capital

Defined as the difference between current assets and current liabilities. There are some variations in how working capital is calculated. Variations include the treatment of short-term debt. In addition, current assets may or may not include cash and cash equivalents, depending on the company.

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working capital

The amount of current assets that is in excess of current liabilities. Working capital is frequently used to measure a firm's ability to meet current obligations. A high level of working capital indicates significant liquidity. Also called net current assets, net working capital. See also current ratio, quick ratio.