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
- Dolby Laboratories, Inc. Earnings: Sounding Off With a Strong Quarter
- 3 Things Working Against Keurig 2.0 Brewers
- Consumers to the Left of Her, Enterprises to the Right: Can Meg Whitman Handle the New Hewlett-Packa
- Can Groupon Turn Around Its 48% Stock Fall?
- Carter?s Inc. Takes Care of Business and Beats on Earnings
- Mobile Mini Inc. Delivers on Its Growth Plan