Balance Sheet & Working Capital
Working Capital
Turns operating funds tied in receivables, stock and payables into a read on efficiency and liquidity consumption. It shows whether growth is being converted into cash or trapped in the operating cycle.
Working Capital
workingCapital · Balance Sheet & Working Capital
- Definition
- Turns operating funds tied in receivables, stock and payables into a read on efficiency and liquidity consumption. It shows whether growth is being converted into cash or trapped in the operating cycle.
- Calculation
- Current assets - current liabilities.
- Uses
- Very useful in retail, distribution, industrials, hardware, autos and businesses with inventory or customer credit. Less useful in pure software, advance-payment platforms and financials. Cross-check growth, gross margin, CFO, DSO, DIO, DPO and cash conversion cycle.
