Which of the following statements about working capital is true?

Working capital is a critical measure of a company's short-term financial health and liquidity. It is calculated by subtracting current liabilities from current assets. A positive working capital indicates that a company has sufficient short-term assets to cover its short-term liabilities, which is essential for maintaining operations and meeting obligations as they come due.

Viewing working capital as a measure of liquidity is essential because it provides insights into how effectively a company can manage its cash flow and operational expenses. Companies with adequate working capital are better positioned to invest in opportunities, avoid financial distress, and respond to unforeseen circumstances.

Other options present inaccuracies about working capital. For instance, it is not always negative, as healthy businesses typically have a positive working capital. Additionally, working capital is indeed relevant to financial health for all businesses, not only large ones, as every company requires liquidity to operate effectively, regardless of its size.