How to Calculate Working Capital?

Working capital is an important indicator of a company’s financial health. It must be maintained at sufficient levels to meet short term obligations, but not so high that it constrains future growth or leaves them exposed in case economic conditions change unexpectedly for the worse. A liquidity metric like this one can also help businesses determine how much debt they need when financing investments with fixed cost overruns; if working-capital stays too low then only part (or none) will come from borrowing money while any excess still gets spent out right because there isn't enough left over after all expenses are paid against revenue until next quarter. The formula is: Working capital = Current assets – Current liabilities

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