Broadly speaking, it is the difference between a company’s current assets and current liabilities:
For example, if a company has $100,000 in current assets and $65,000 in current liabilities, then its working capital is:
Working capital = 100,000 – 65,000= $35,000
However, putting it simply this way is a bit off the mark as this formula doesn’t distinguish between operating items (e.g. accounts receivable, inventory, and accounts payable) and financing items (such as cash, marketable securities, and one year liabilities). Accordingly, a more accurate measure is practically used to account for shortcomings (literally, it is known as operating working capital).
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