Working capital is the difference between a business’s current assets and its current liabilities. It’s an important indicator of a company’s short-term financial health, as it shows how much liquidity the business has available to pay off debts, use in investments, or generate revenue. Calculating working capital requires a careful review of all current assets and liability account balances, including cash on hand, accounts receivable, inventory, prepaid expenses, accounts payable and accrued liabilities. With this information companies can easily compute their working capital, which helps provide insight into their overall financial stability.