Should Short-Term Investments be included in Working Capital calculations?

• A. Yes
• B. No
• C. Sometimes
• D. Only for certain industries

Answer: (B)

Working capital measures short‑term liquidity tied to day‑to‑day operations, so it focuses on operating current assets (like cash and cash equivalents, accounts receivable, and inventory) minus operating current liabilities. Short‑term investments are typically considered non‑operating assets pursued for return rather than for the routine running of the business. They can be converted to cash, but they don’t participate in the operating cycle, so including them would mix investment liquidity with operating liquidity and distort the picture of operational health. Therefore, they’re not included when the goal is to assess operating liquidity. (If you were using a broader definition that simply subtracts current liabilities from total current assets, they would be included, but for operating working capital this is not the case.)