Working Capital

The Bigger Picture In Selling Your Business

Working capital is a company’s available funds for its day-to-day operations. It is current assets minus current liabilities. A company’s working capital is affected and assessed by its cash position, inventory, sales, accounts receivable, accounts payable, short-term debt due, inventory management, debt management, revenue collection, and payments to suppliers.

How much working capital a business has is a measure of its financial health and performance, because it determines its ability to operate on a daily basis. The more working capital a company has, the more it can improve, grow and expand its operations. Vice versa, the less working capital a company has, the less it is able to improve, grow and expand its operations; such a development is a threat to its very existence in the medium to long-term.

Even a profitable company can fail if it does not manage its working capital effectively. Working capital is also variously called net current assets and current capital.

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First Floor, 5, Fortuna Court Calleva Park, Reading RG7 8UB

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