What is classified as working capital?

Working capital refers to the difference between a company's current assets and current liabilities. It is a measure of a company's short-term financial health and operational efficiency, indicating the available funds for day-to-day operations. Current assets typically include cash, accounts receivable, and inventory, while current liabilities encompass Accounts Payable and other short-term obligations. Sufficient working capital is essential for maintaining smooth business operations and meeting short-term financial commitments.