Working capital is a financial metric that calculates the liquidity available to a business for meeting short-term obligations and operational needs. It is derived by subtracting current liabilities from current assets. A positive working capital indicates that a company can cover its short-term liabilities with its short-term assets, which generally signifies good financial health. Conversely, a negative working capital may raise concerns about a company's liquidity and ability to meet its obligations when due.\n\nFor example, if a business has current assets including cash, accounts receivable, and inventory of $500,000 and current liabilities such as accounts payable and short-term debt of $300,000, its working capital would be $200,000. Managing working capital effectively ensures that a company can operate smoothly and meet its financial commitments promptly.\n\nWorking capital is crucial when assessing a company's financial stability and operational efficiency, especially during financial reporting and month-end close procedures.