Working Capital

Working capital is the difference between a firm's current assets and its current liabilities. Using net working capital to compare one firm to another is not very effective but it is a good measure for internal control. The larger the working capital, the greater the firm operating liquidity and thus its ability to meet its short-term liabilities. Furthermore, a minimum level of working capital is often a requirement on long-term loans.

Working Capital = Current Assets - Current Liabilities