Current assets minus current liabilities — the operating cushion.
Working capital is current assets minus current liabilities: the cushion between what will become cash soon and what must be paid soon. It's the standard quick answer to 'can this business pay its bills?'
Healthy working capital means room to operate; negative working capital means near-term obligations exceed near-term resources — survivable in some fast-turning business models, alarming in most. Growth quietly consumes working capital (receivables and inventory swell before the cash arrives), which is how profitable businesses end up cash-strapped.
Current assets $40,000 (cash, receivables) against current liabilities $28,000: working capital of $12,000. After landing a big contract that doubles receivables and triples supplier orders, the same business may need to watch this number weekly.
Current Liabilities · Cash Flow Statement · Accounts Receivable (A/R) — or browse the full plain-English glossary.
Reading a definition is the easy part — the Daily Challenge (ten questions a day, free, no signup) is how terms like this become reflexes. Going for certification? Start with the free ProAdvisor readiness check.