Working Capital
Definition
Working Capital: Working capital is the difference between current assets (cash, accounts receivable, inventory) and current liabilities (accounts payable, short-term debt). It measures a company's short-term liquidity and operational efficiency. Positive working capital means a company can cover short-term obligations; negative working capital may indicate cash flow problems.
Example Usage
“With $200K in receivables and $50K in payables, we have $150K in working capital to fund operations.”
Common Misconceptions
Related Terms
Burn Rate
Burn rate is the speed at which a company spends its cash reserves before generating positive cash flow. Gross burn is total monthly expenses, while n...
Runway
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