Learn / Fundamentals / Financial health / Working Capital
Working Capital = Current Assets − Current Liabilities
Working capital is the dollar gap between what should turn into cash soon and what the company owes soon. Positive means a cushion. Negative means bills outrun assets.
01 Feel it first
Slide current assets and current liabilities. Watch the working-capital dollar result and the two-bar stack. Negative turns crimson.
02 Break the intuition
A $50 cushion looks fine on paper. Reveal what happens when most of it is slow inventory.
03 Explore the stack
Tap each slice. Toggle inventory out and watch working capital drop from $50 to −$50.
Ready now. The fastest part of working capital.
With inventory, working capital is $50 ($150 assets − $100 bills). Strip inventory and only $50 of liquid assets remain against $100 of bills. The cushion turns −$50.
04 Sort it
Same formula, different stories. Sort each scenario into a comfortable cushion or a warning sign.
Tap a scenario, then pick healthy cushion or warning.
Tap a card, then tap a bucket.
05 Two flavors
One balance-sheet photo can lie. Averages smooth out busy seasons.
06 The catch
Negative is stress. Small positive can still be fragile. Large positive with mostly cash is strongest.
07 Check yourself
08 Where it breaks
Goods on the shelf count as assets but may not sell before bills are due. Pair working capital with the quick ratio.
Retailers and farmers look different in peak vs off-season. A single year-end photo can mislead.
A bank line the company has not drawn is real backup cash, but it does not appear in working capital. Read the footnotes.
You can cover near-term bills and still owe too much for the long haul. Liquidity is not the same as solvency.
Open any ticker for balance-sheet context — then screen for firms with a real short-term cushion.
With $150 of near-term assets and $100 of bills due soon, the cushion is $50. Positive working capital means assets beat bills on paper.