Working capital is calculated as:
Explanation
Working capital is current assets minus current liabilities, the short-term money actually available to run the business. Total assets minus total liabilities is owner's equity, which measures net worth rather than liquidity. Revenue minus operating expenses is operating profit, a period result rather than a balance. And cash minus payables ignores receivables, inventory and the rest of the current accounts, so it understates what is on hand to work with.
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