What Is Working Capital?

By Lee Samaha – Updated Jun 3, 2025 at 1:13 PM

Key Points

Working capital measures financial health by subtracting current liabilities from assets.
A current ratio above 1 indicates adequate working capital, reflecting company stability.
Excessive working capital suggests potential inefficiencies in cash utilization compared to peers.

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Working capital. — Image source: Getty Images.

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About the Author

Lee Samaha is a contributing Stock Market Analyst at The Motley Fool covering industrials, electricals, energy, materials, transportation, and infrastructure stocks. Prior to The Motley Fool, Lee was a Civil Engineer and Investment Manager. He holds a Bachelor of Civil and Structural Engineering from Southampton University and a Certificate in Investment Management from Chartered Institute for Securities & Investment. Lee first cut his investing teeth on The Motley Fool bulletin boards (commonly referred to as the “Fool Boards,”) and he’s infinitely grateful to all of the investors he learned from in this powerful investing community.

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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.