Working capital is the excess of current assets over current liabilities.
In other words, it is the amount of money a company has available to cover its short-term obligations, such as paying bills or employees. To calculate working capital, you subtract the company's current liabilities from its current assets. Current assets are the resources a company has that are expected to be converted into cash within a year, like cash, accounts receivable, and inventory. Current liabilities are the debts and obligations that are due within a year, like accounts payable and short-term loans. If current assets are greater than current liabilities, the company has positive working capital and is in good financial health. If current liabilities are greater than current assets, the company has negative working capital and may struggle to meet its obligations.