The difference between current assets and liabilities is known as the working capital. It is a quantitative measure that determines an organization's solvency, especially its ability to make bulk purchases and offering credit terms to attract customers. If the working capital is positive, then the assets are more than enough to cover immediate and long-term liabilities. However, if the working capital is negative, then the organization does not have enough to meet its obligations, such as bills and salaries. Furthermore, without working capital, the organization will be forced to liquidate some of its assets to meet its short-term obligations. In FY 2019, for instance, Starbucks had total current assets and liabilities worth $5.65 billion and $6.17 billion, respectively (Starbucks, 2019). The company, therefore, had negative working capital and was subject to the conditions explained above.
On the other hand, cash flow is the movement of funds in and out of the organization due to its activities in creating goods and services. Therefore, working capital and cash flow go hand in hand. For instance, Starbucks would have had to liquidate some of its assets or get credit to keep their cash flow in FY 2019. In other words, positive working capital is a desirable state. The difference, however, is the time frame. Working capital measures the available funds that the company uses to gain purchasing power.
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On the other hand, cash flow is about the timing through the influx and outgoing funds (including working capital). If cash flow is limited, the influx of funds is not enough to keep the company in positive working capital, which affects its purchasing power. For instance, though Starbucks was in negative working capital in FY 2019, its net cash flow from its activities was $5.047 billion (Starbucks, 2019). This indicated that it would soon cross over to positive working capital.
References
Starbucks. (2019). Fiscal 2019 Annual Report . Starbucks. Retrieved from https://s22.q4cdn.com/869488222/files/doc_financials/2019/2019-Annual-Report.pdf
