What does working capital indicate about a company?

Working capital is a financial metric that measures a company's short-term liquidity and operational efficiency. It is calculated by subtracting current liabilities from current assets. A positive working capital indicates that a company has enough assets to cover its short-term liabilities, suggesting good short-term financial health. This is crucial for businesses to manage day-to-day operations, pay suppliers, and meet other short-term obligations.

In contrast, the other options relate to different aspects of a company's financial performance. Current stock price stability pertains more to market perception and investor sentiment rather than operational efficiency. Market demand for products relates to sales and marketing conditions rather than the immediate financial resources available to manage operational costs. Overall profitability encompasses long-term performance metrics that go beyond short-term liquidity, focusing more on net income rather than the status of current assets and liabilities. Therefore, the indication of working capital aligns specifically with assessing a company’s short-term financial health.