The concept of "working capital" has narrow sense and broad sense. The broad meaning of working capital is the total current assets of an enterprise. This concept is mainly used to study the liquidity and turnover of enterprise assets. In a narrow sense, working capital refers to the balance of total current assets minus current liabilities, also known as net working capital. Since net working capital can be regarded as the source of capital for enterprises to invest in non-current assets and pay off non-current liabilities, the narrow concept of working capital is mainly used to study the solvency and financial risks of enterprises. Therefore, the holding status and management level of working capital of enterprises are directly related to the profitability and financial risks of enterprises.

Working capital = current assets-current liabilities = long-term capital-long-term assets