Working Capital is a measure of a company's short term liquidity or its ability to cover short term liabilities. Working capital is defined as the difference between a company's current assets and current liabilities. That is,
Analysts use working capital to determine how easily a company can meet its liabilities over a short time horizon. It is also used when calculating other financial metrics like free cash flow. When management uses working capital as a basis for business decisions their goal is to make sure the company is able to continue its operations in the short term while covering any near-term debt as well as operating expenses.