Working capital is a measure of a company’s liquidity and financial health. It is defined as the difference between current assets (cash, accounts receivable, inventory) and current liabilities (accounts payable, debt). To calculate working capital, subtract total current liabilities from total current assets. A positive working capital indicates that a company can pay off its short-term obligations, while a negative working capital means that the company cannot meet its current liabilities when they come due. By tracking working capital levels over time, businesses can identify potential financial issues before they become serious problems.