<P> A company can be endowed with assets and profitability but short of liquidity if its assets cannot readily be converted into cash . Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short - term debt and upcoming operational expenses . The management of working capital involves managing inventories, accounts receivable and payable, and cash . </P> <P> Working capital is the difference between the current assets and the current liabilities . </P> <P> The basic calculation of the working capital is done on the basis of the gross current assets of the firm . </P> <P> Working Capital = CURRENT ASSETS − CURRENT LIABILITIES (\ displaystyle (\ text (Working Capital)) = (\ text (CURRENT ASSETS)) - (\ text (CURRENT LIABILITIES))) </P>

Working capital is equal to current assets minus current liabilities