What type of account is typically not included in the calculation of working capital?

Working capital is calculated using the formula: Current Assets minus Current Liabilities. It serves as a measure of a company’s short-term financial health and its efficiency in managing its operational liquidity. To derive working capital, only current accounts are considered—those that are expected to be converted into cash, sold, or consumed within one year.

Long-term debt is categorized as a non-current liability, meaning it is not due within the next year. Since long-term debt does not pertain to the company's short-term operational capabilities or liquidity, it is excluded from the calculation of working capital. This allows working capital to accurately reflect the resources available to meet short-term obligations, crucial for understanding a company's operational efficiency and financial position.

Current liabilities, cash, and inventory, on the other hand, directly relate to current operations and therefore play a vital role in working capital calculations.