The formula is current assets minus current liabilities: cash, money owed to you by customers and sellable inventory, less bills, credit-card balances and anything else due within a year. Positive working capital means you can meet the next twelve months of obligations from the resources already in hand. Negative means you are relying on future sales, a loan, or luck.
It matters because profitable businesses fail on timing. You can win a large contract, do the work, invoice on 60-day terms, and be unable to pay your own suppliers in week three. Growth makes this worse, not better — every new order ties up more cash in materials and labour before any of it comes back. Founders running several ventures should watch it per business, since one entity's healthy balance does not legally or practically cover another's shortfall.
A concrete example: your studio holds $18,000 in cash and $22,000 in unpaid client invoices, against $9,000 of card debt and $14,000 owed to contractors this quarter. Working capital is $17,000 — comfortable. Then you win a $60,000 project requiring $25,000 of contractor spend up front, paid on delivery in 90 days. On paper it is a great month. In practice working capital goes sharply negative and you need either faster invoice terms, a deposit, or a credit line before you accept.