GlossaryAccountingAdvisory
Working Capital
Definition
Current assets minus current liabilities: the short-term resources a business has to run its day-to-day operations.
In plain language
Working capital measures whether what a business will turn into cash soon — receivables, inventory, cash — covers what it must pay soon, such as suppliers and short-term dues.
A profitable business can still run short of cash if money is tied up in stock or in customers who pay slowly. Watching working capital is how that gap is seen before it becomes a problem.
Example
A business with ₹30 lakh of current assets and ₹18 lakh of current liabilities has working capital of ₹12 lakh.