Definition of Working Capital

Working capital includes cash and short term assets that can be used to pay for an organization's current needs.
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Companies use working capital to pay bills, buy inventory and purchase equipment. In accounting terms, working capital is the excess of current assets over current liabilities as of any given date.

Working Capital References On This Site

These Gaebler.com articles mention this glossary term:

• Business Line of Credit - You never know when you might need some working capital...
• Developing a Comprehensive Recordkeeping System - A cash flow statement can answer these questions: Are the operating activities generating cash? Which working capital components have large uses of cash...
• Financial Metrics - Below is an important list of commonly used financial metrics and their definitions: EBIT/EBITDA - Earnings before interest and taxes, and earnings before interest, taxes, depreciation, and amortization FCF - Free cash flow; the sum of operating cash flow, financing cash flow, and investment cash flow EPS - Earning per share; net earnings or profit divided by the total number of shares issued P/E Ratio - Price to earnings ratio; the price of one share of a company divided by its earnings per share Net Working Capital - Current assets minus current liabilities...
• Accounting Terminology for Entrepreneurs: P-Z - Working capital, also referred to as net working capital, is liquid in nature and is used to finance...
• Balance Sheet Interpretation Part II: Liquidity Ratios - Working capital = current assets – current liabilities You can view working capital as the safety cushion against a liquidity crisis (or...
• How John N. Clark Went From Employee to Coffee Company Owner - You MUST have enough working capital to survive the start-up period of cash out...
• Why a Small Business Stimulus Makes Sense - Finally, the Obama administration is acknowledging that giving money to the banks was not a cure-all and that they need to make working capital loans more readily available to business owners who will...
• Web Tools for Small Business Finances - Enables small businesses that need to increase their working capital or liquidity immediately to do so by auctioning their...
• CIT Bailout - Existing businesses that depend on credit for working capital are seeing their credit lines pulled and reduced. Firms...
• Obtaining Funding - How to Decide How Much to Raise - You may want to raise some extra working capital. Think through some worst-case scenarios. After an analysis...
• Breaking Down Break-Even Analysis Part -1 - Not knowing our break even point and length of time it would take to reach that point we will not be able to compute the working capital required to provide for to ensure financial security...
• Business Line of Credit - You never know when you might need some working capital...
• Developing a Comprehensive Recordkeeping System - A cash flow statement can answer these questions: Are the operating activities generating cash? Which working capital components have large uses of cash...
• Accounting Terminology for Entrepreneurs: P-Z - Working capital, also referred to as net working capital, is liquid in nature and is used to finance...
• Obtaining Funding - How to Decide How Much to Raise - You may want to raise some extra working capital. Think through some worst-case scenarios. After an analysis...
• Web Tools for Small Business Finances - Enables small businesses that need to increase their working capital or liquidity immediately to do so by auctioning their...
• Breaking Down Break-Even Analysis Part -1 - Not knowing our break even point and length of time it would take to reach that point we will not be able to compute the working capital required to provide for to ensure financial security...
• Why a Small Business Stimulus Makes Sense - Finally, the Obama administration is acknowledging that giving money to the banks was not a cure-all and that they need to make working capital loans more readily available to business owners who will...
• Financial Metrics - Below is an important list of commonly used financial metrics and their definitions: EBIT/EBITDA - Earnings before interest and taxes, and earnings before interest, taxes, depreciation, and amortization FCF - Free cash flow; the sum of operating cash flow, financing cash flow, and investment cash flow EPS - Earning per share; net earnings or profit divided by the total number of shares issued P/E Ratio - Price to earnings ratio; the price of one share of a company divided by its earnings per share Net Working Capital - Current assets minus current liabilities...
• How John N. Clark Went From Employee to Coffee Company Owner - You MUST have enough working capital to survive the start-up period of cash out...
• CIT Bailout - Existing businesses that depend on credit for working capital are seeing their credit lines pulled and reduced. Firms...
• Balance Sheet Interpretation Part II: Liquidity Ratios - Working capital = current assets – current liabilities You can view working capital as the safety cushion against a liquidity crisis (or...