Financial Analysis
Working Capital
Current assets minus current liabilities. The liquid resources a business requires to fund day-to-day operations, covering inventory, receivables, and short-term obligations.
Current assets minus current liabilities. Represents the net liquid resources available to fund ongoing operations, including inventory, accounts receivable, and prepaid expenses, offset by accounts payable, accrued liabilities, and other short-term obligations. In a business acquisition, working capital is commonly subject to a negotiated target, or peg, establishing the baseline amount the seller must deliver at closing. Shortfalls below the peg typically result in a purchase price reduction; excess amounts may be retained by the seller or credited to the buyer. (See also: working-capital-peg, working-capital-reserve.)