Fundamental Glossary / Financial Statements
Working Capital
The capital tied up in the day-to-day cycle of inventory, receivables, and payables.
Formula
A common formula is current assets - current liabilities. Operating working capital often uses inventory + receivables - payables, and leaves cash and debt out.
What it means
Working capital is the money that keeps the operating cycle moving. A manufacturer pays for materials before customers pay for the finished goods. That gap is working capital.
The broad accounting definition includes cash and short-term debt. Analysts often prefer operating working capital so that a new loan does not look like better operations.
How to read it
Rising sales usually need more working capital. If working capital rises much faster than sales, cash is getting stuck.
What to watch
Negative working capital can be a strength, as it is for a retailer that collects cash before it pays suppliers. It can also be a distress signal if it comes from unpaid bills. Know which one you are looking at.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.