In business finance, what term describes current assets minus current liabilities?

In business finance, working capital is current assets minus current liabilities.

It measures the short-term resources available for a company’s day-to-day operations. Current assets commonly include cash, inventory, and accounts receivable, while current liabilities include short-term debts and accounts payable. Positive working capital can help a business pay suppliers, employees, and other near-term obligations.

Working capital is not the same as cash. A company may have substantial working capital tied up in inventory or unpaid customer invoices. Analysts therefore examine both the amount and the quality of those assets, as well as how quickly they can be converted into cash.

The related measure “working capital ratio” divides current assets by current liabilities. Working capital management focuses on balancing liquidity with efficient use of resources, because excessive inventory or slow collections can tie up funds.