This is a short-term financial analytical tool calculated by subtracting current liabilities from current assets. To determine what is a safe and comfortable cushion to cover the debts that may come due, this figure needs to be compared to the cash flow of the CDA Idaho company as well as to prior years of data.

One of the most significant uses of working capital is inventory. The longer inventory sits on the shelf or in the warehouse, the longer the company’s working capital is tied up.