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Working capital is the money a business has available to cover its short-term expenses and operations.
In Depth
It's calculated by subtracting current liabilities (what the business owes soon) from current assets (what the business owns that can be turned into cash quickly). Positive working capital means a business can pay its immediate bills, while negative working capital can signal financial trouble. It's a key indicator of a company's short-term financial health and operational efficiency.
Example
A small bakery needs sufficient working capital to buy ingredients, pay its staff, and cover rent until customers pay for their orders.