What is defined as the difference between current assets and current liabilities?

The definition of the difference between current assets and current liabilities is known as working capital. Working capital is a financial metric that measures a company's operational efficiency and short-term financial health. It indicates the amount of capital a company has available to meet its short-term obligations and finance its day-to-day operations.

Current assets are assets that are expected to be converted into cash or used within one year, such as cash, accounts receivable, and inventory. Current liabilities are obligations the company expects to settle within the same time frame, including accounts payable and short-term debt. By subtracting current liabilities from current assets, working capital provides insights into the liquidity of the business and its capability to sustain operations without encountering financial distress in the short term.

This is an important figure for both management and investors, as it illustrates how effectively a company can manage its cash flow to support business operations and respond to unforeseen expenses or opportunities.