Working capital is the funds available for day-to-day operations—the difference between current assets (cash, receivables, inventory) and current liabilities (payables, short-term obligations). Adequate working capital ensures organizations can pay bills, meet payroll, and handle routine expenses without borrowing. Municipal working capital needs reflect cash flow timing—property taxes arrive in installments while expenses occur continuously. Working capital policies establish target levels ensuring operational liquidity. Insufficient working capital forces short-term borrowing, incurring interest costs and indicating potential financial stress. Excess working capital may indicate opportunities to deploy funds more productively. Cash flow forecasting helps manage working capital by anticipating receipt and payment timing. Working capital management is a fundamental aspect of sound municipal financial management.