We can define working capital as either money available to a company for its day-to-day operations or the difference between a company’s current assets and current liabilities.
A current liability is an obligation that will be due within one year of the date of the company’s balance sheet.
A current asset is a company’s cash and its other assets that are expected to be converted to cash within one year of the date appearing in the heading of the company’s balance sheet .
Formula to calculate working capital.
![Calculate Working Capital.](https://www.learntocalculate.com/wp-content/uploads/2020/05/working-capital..png)
Example:
Below is a balance sheet used to calculate working capital.
![Calculate Working Capital.](https://www.learntocalculate.com/wp-content/uploads/2020/05/Balance-sheet-1024x754.png)
Total current in the balance sheet is Sh. 3,800,000 and the total current liabilities is Sh. 80,000.
![Calculate Working Capital.](https://www.learntocalculate.com/wp-content/uploads/2020/05/working-capital.-2.png)
Therefore, the working capital is Sh. 3,720,000.