Working capital
Also called: net working capital, operating working capital
Current assets minus current liabilities. Its operating part, receivables plus inventory minus payables, is the money tied up in day-to-day business.
Working capital measures how much money a business needs to fund its day-to-day operations: stock waiting to be sold and money owed by customers, less money owed to suppliers.
As a business grows, its working capital usually grows too, which uses cash even when profit is rising.
Example
A company with receivables of ₹60 crore, inventory of ₹42 crore and payables of ₹28 crore has operating working capital of ₹74 crore.
Learn more in these lessons
- Working capital, inventory and receivablesWhat is working capital and why does it matter?
- The balance sheetHow do you read a company's balance sheet?
Related terms
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