Working capital vs changes in working capital.

Working capital is a measure of a company's short-term liquidity, and it is calculated by subtracting a company's current liabilities from its current assets. Current assets are cash and other assets that can be converted into cash within one year, such as accounts receivable and inventory. Current liabilities are debts that are due within one year, such as accounts payable and short-term loans.

A positive working capital means that a company has enough current assets to cover its current liabilities, and it is a sign of a company's ability to meet its short-term obligations. A negative working capital, on the other hand, indicates that a company may not be able to meet its short-term obligations and may need to raise additional capital or sell assets to cover its liabilities.

On the other hand, changes in working capital refer to the difference between the current year's working capital and the previous year's working capital. It can be calculated by subtracting the previous year's working capital from the current year's working capital.

Changes in working capital can be positive or negative. A positive change in working capital means that the current year's working capital is greater than the previous year's working capital, indicating that the company has increased its short-term liquidity. A negative change in working capital means that the current year's working capital is less than the previous year's working capital, indicating that the company has decreased its short-term liquidity.

Overall, working capital is a measure of a company's short-term liquidity, while changes in working capital is a measure of the changes in a company's short-term liquidity over time. Both are important indicators of a company's financial health and stability.