Working Capital
Working Capital tells you how much money a company has readily available to cover its everyday running costs — things like paying suppliers, wages, and rent. It's a quick health check on whether a business can comfortably meet its short-term bills.
To calculate it, you subtract "Current Liabilities" (CL) from "Current Assets" (CA). Current Assets are things the company owns that can be turned into cash within a year — cash itself, money customers owe you, and inventory. Current Liabilities are the bills and debts due within that same year. So Working Capital = Current Assets minus Current Liabilities.
Reading the result is simple: a positive number means the company has more short-term resources than short-term debts, which is a good sign of financial breathing room. A negative number is a warning that the company may struggle to pay its near-term bills. A very high number can mean money is sitting idle instead of being put to productive use.
A project manager cares about this because a company with healthy Working Capital can fund projects, pay contractors on time, and absorb small surprises without cash-flow panic.
Think of it like your household budget after payday: your available cash and money owed to you, minus the bills sitting on the counter. What's left over is the buffer you can actually spend on groceries and daily life without worrying.
Imagine a company has Current Assets of $500,000 (cash, receivables, and inventory) and Current Liabilities of $300,000 (bills and short-term debts due this year). Working Capital = $500,000 − $300,000 = $200,000. This positive $200,000 means the company has a comfortable cushion of cash and near-cash resources to keep operations running smoothly after covering its immediate obligations.
Every PMP formula explained free — plus worked examples and practice in PMP Math, and full timed mocks in the simulator.