Glossary

Working capital

The money a business has tied up in day-to-day operations — current assets minus current liabilities — and the fuel for meeting short-term obligations.

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Definition

Working capital is current assets (cash, stock, money owed to you) minus current liabilities (money you owe within a year). Positive working capital means the business can cover its short-term obligations; negative working capital signals a squeeze.

Why it matters

Working capital is what funds the gap between paying suppliers and being paid by customers. When it runs short — often through overtrading — a working-capital facility bridges it. See also the cash conversion cycle.