Working capital is a company's current assets (cash, receivables, inventory) minus its current liabilities (accounts payable, short-term debt), a measure of whether it has enough short-term resources to cover its short-term obligations.
Positive working capital means a company can cover what it owes in the near term without raising more cash or selling a long-term asset. Negative working capital doesn't automatically mean trouble. Some business models, like ones that collect cash upfront and pay suppliers later, run structurally negative and still function fine, but it's worth understanding why the number looks the way it does rather than assuming it's fine by default.
Working capital gets scrutinized closely in an acquisition, since a buyer typically wants the company to arrive with a normal, agreed-upon level of it, not stripped down right before closing. Working capital adjustments are a common, and sometimes contentious, part of negotiating the final purchase price in a sale.
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