Working Capital

The money available for day-to-day operations, calculated as current assets minus current liabilities. It is the financial buffer that keeps a business running.

Positive working capital means you can cover upcoming bills. Negative working capital is an early warning sign that cash problems are coming, even if the business is growing.

You have £5,000 in your business account and £1,500 in stock. Current liabilities (supplier invoices due): £2,000. Working capital = (£5,000 + £1,500) − £2,000 = £4,500.