Working Capital Definition: Difference Between Current Assets & Liabilities

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Working Capital Definition

Short Definition
Working capital is the difference between current assets and current liabilities.

Extended Definition
Working Capital is the money used to pay short term debts. Working capital calculated by subtracting current assets from liabilities. Assets must be readily available to be turned into cash, (if not cash itself), to cover current liabilities. Working capital can show the overall financial health of a small business. Positive working capital shows a business is able to pay off short-term liabilities readily. Negative working capital may indicate financial problems such as slow sales, or collection problems.

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What is Working Capital?

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