Working capital, also known as net working capital (NWC), is a measure of a company's liquidity, operational efficiency and short-term financial health. CFI is the official provider of the global Financial Modeling & Valuation Analyst (FMVA)™ FMVA® Certification Join 350,600+ students who work for companies like Amazon, J.P. Morgan, and Ferrari certification program, designed to help anyone become a world-class financial analyst. Working capital is the amount of cash and other assets a business has available after all its current liabilities are accounted for. Working capital can be negative if current liabilities are greater than current assets. See more. We hope this guide to the working capital formula has been helpful. It forms a part of the aggregate capital of the business. Working capital formula and definition. If it has substantial cash reserves, it may have enough cash to rapidly scale up the business. Working capital in financial modeling. Conversely, a tight working capital situation makes it quite unlikely that a business has the financial means to accelerate its rate of growth. A key part of financial modeling involves forecasting the balance sheet. Working capital refers to a specific subset of balance sheet items. The definition of working capital (shown below) is simple: Working capital = Current assets - current liabilities Working capital is calculated by subtracting current liabilities from current assets. more Deferred Credit Definition Net working capital can also be used to estimate the ability of a company to grow quickly. working capital definition: 1. the money belonging to a company that is immediately available for business use, rather than…. Working capital definition and example. Working capital definition, the amount of capital needed to carry on a business. One of the major reasons behind an investor's desire to analyze a company's balance sheet is that doing so lets them discover the company's working capital or "current position." more Current Liabilities Definition Working capital is defined as current assets minus current liabilities. Typically, firms with an optimum level of working capital indicate efficiency in managing its operations. Working capital reveals a great deal about the financial condition, … Working capital is defined as the excess of current assets over current liabilities. Now, a business needs working capital to fund its short term obligations. For example, if a company has current assets of $90,000 and its current liabilities are $80,000, the company has working capital of $10,000. Working capital, also known as net working capital (NWC), is a measure of a company's liquidity, operational efficiency and short-term financial health. Learn more. 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