Working capital is a measure of a business’s financial health, calculated by subtracting its current liabilities from its current assets. Negative working capital occurs when current liabilities exceed current assets, showing that the business is unable to cover its immediate expenses and debts. This can be a sign of financial instability and a potential red flag for investors, lenders and creditors. To stay afloat, a business needs positive working capital – which can come from securing external funding or reducing short-term expenses. With proper management, businesses can get their finances back on track and ensure reliable access to cash flow.