Liquidity and Working Capital Working Capital Working capital is defined as the excess of current assets over current liabilities Widely used measure of short-term liquidity Deficient when current liabilities exceed current assets In surplus when current assets exceed current liabilities Margin of safety for creditors Aliquid reserve to meet contingencies and uncertainties A constraint for technical default in many debt agreementsWorking capital is ➢ defined as the excess of current assets over current liabilities ➢ Widely used measure of short-term liquidity ➢ Deficient when current liabilities exceed current assets ➢ In surplus when current assets exceed current liabilities ➢ A margin of safety for creditors ➢ A liquid reserve to meet contingencies and uncertainties ➢ A constraint for technical default in many debt agreements Liquidity and Working Capital Working Capital