Working capital is the amount of cash and other current assets a business has available after all its current liabilities are accounted for.
For example, a retailer with $280,000 in current assets (cash, receivables, and inventory) and $160,000 in current liabilities (supplier invoices and the current portion of its loan) has $120,000 in working capital — the cushion available to fund day-to-day operations and absorb short-term financial shocks.
Why it matters: A positive working capital indicates the company can fund its current operations and invest in future activities and growth.
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