Working capital is current assets (cash, accounts receivable, inventory) minus current liabilities (accounts payable, short-term debt, accrued expenses). It represents the money available to fund daily operations after covering immediate obligations.
Positive working capital means the business can pay its near-term bills. Negative working capital means current liabilities exceed current assets — the business may struggle to cover payroll, rent, or supplier invoices without additional financing.
For a new business, working capital is funded by the initial investment and should be explicitly allocated in the use of funds. The amount needed depends on the gap between when costs are incurred (before opening and during the ramp-up period) and when revenue covers those costs. A common mistake in financial projections is underestimating the working capital required to survive the first months of operation. See Managing Cash Flow.