Working capital is a vital metric to consider when assessing the financial health of a company. On a balance sheet, working capital is defined as the difference between a company’s current assets and current liabilities. Current assets are those that can be converted into cash or used up within one year, while current liabilities are those obligations due within one year as well. Working capital serves as an important indicator of a business’s ability to pay off short-term debts and finance operations. It also influences a company’s access to external financing, such as through loans or lines of credit. In short, understanding the value of working capital on a balance sheet is crucial for any business looking to stay afloat in today’s fiercely competitive market.