working capital

Meaning

Working capital is the difference between a company's current assets and its current liabilities. It represents the liquid assets a business has available to fund its daily, short-term operations. This term is formal and is commonly used in corporate finance, accounting, and business management.

Examples

• The company struggled to pay its suppliers due to a temporary shortage of working capital.

  The company struggled to pay its suppliers due to a temporary shortage of working capital.

• Improving inventory management is an effective way to free up working capital.

  Improving inventory management is an effective way to free up working capital.

• We need to secure a short-term loan to boost our working capital before the busy season.

  We need to secure a short-term loan to boost our working capital before the busy season.

• The acquisition left the firm with very little working capital to run its daily operations.

  The acquisition left the firm with very little working capital to run its daily operations.

• A positive working capital indicates that a company can easily cover its short-term debts.

  A positive working capital indicates that a company can easily cover its short-term debts.

Common Mistakes

• ✗ Our company has a lot of working capitals this quarter.

  ✓ Our company has a lot of working capital this quarter.

  Working capital is an uncountable noun. It should not be pluralized as 'capitals' when referring to operational funds.

• ✗ We spent our working capital to buy a new office building.

  ✓ We spent our capital expenditure to buy a new office building.

  Working capital is strictly for day-to-day operational expenses (like inventory and payroll), not for long-term physical assets (which fall under capital expenditure).

Related Expressions

Practice

• Without sufficient ________, the retail store couldn't purchase enough inventory for the holidays.

  💡 The money needed to fund day-to-day operations.

  Show answer

  working capital

• The CFO focused on reducing outstanding invoices to improve the firm's ________.

  💡 Current assets minus current liabilities.

  Show answer

  working capital