Working capital represents the amount of liquidity available to a company's operations.
Working capital measures how liquid a company's assets are -- that is, how easily they are convertible to cash to supply the day-to-day operational needs of the organization. As such, it provides a measure both of how efficient a company's operations are and how healthy its short-term finances are.
Significant and sustainable working capital provides a company with the flexibility to expand and improve its operations as well as respond to changing economic circumstances.
Working capital is calculated by subtracting current liabilities from current assets. If liabilities exceed assets, the company is said to have a working capital deficit.
Recent Mentions on Fool.com
- Why Movado Group, American Capital, and Keurig Green Mountain Jumped Today
- The Coca-Cola Co. Tries a Slimming Formula
- 3 Reasons Dividend Investors Should Love Calumet Specialty Products Partners' Latest Earnings Result
- The Ins and Outs of Commodity Dividends
- This Just In: Upgrades and Downgrades
- Is Qualcomm Inc. Bottoming Out?