## Working Capital
### Current Assets x Current Liabilities
### Benchmark: See Current Ratio
### Description:Working Capital is the value of money that is used to run your business on a day-to-day basis, It's the money that is inevsted within the part of your business where you buy and sell your products and services. Working capital is not contained within your proprty or any other Fixed Assets. The calculation for Working Capital is conducted from the Balance Sheet and is simply Current Assets minus Current Liabilities. This will provide you with the value of Working Capital currently available. However, this equation does not inform you of whether the value of Working Capital is sufficient to sustain the business on a day-to-day basis. If your business were a human body, then cash would be its blood. You need just the right amount to sustain life; too much and you might cause a haemorrhage, too little and you die.
### Example:A) Current Assets = R850,527 B) Current Liabilities = R654,251 C) Working Capital = R196,276 (A - B)
### Discussion:To assess whether you have just the right amount, you need to calculate the Current Ratio or Working Capital Ratio.
### Related Terminology: |