Finance and accounting
Working capital
Cash tied up in running the business day to day.
Last reviewedWhat does Working capital mean?
Working capital is current assets minus current liabilities. In cases it usually means operating working capital: money owed by customers (receivables) plus inventory, minus money owed to suppliers (payables). A growing business often needs more working capital, which uses cash even when profits are good.
Where does it come up in case interview prep?
- Supply chains explainedLesson in How industries work: the toolkit
- A light balance sheet, and why profit is not cashLesson in Business basics for non-business learners
- Store economics: the numbers that decide profitLesson in Retail
- Chemical economics and operations: feedstock advantage, utilization and the cycleLesson in Chemicals
- How construction and real estate work: who builds, who owns, who paysLesson in Construction, real estate and infrastructure
- Defence and space economics: contracts, backlog and reuseLesson in Defence and space
Related terms
- Balance sheetWhat a company owns and owes at one point in time.
- Free cash flowCash from operations minus capital expenditure.
- Inventory turnoverHow many times stock is sold and replaced in a year.
- ProfitThe money left over after costs. Revenue minus cost.
- RevenueMoney earned from sales, before costs.
- CostWhat it takes to make and sell the product in a period.
- Fixed costA cost that stays the same when volume changes, within a normal range.
- Variable costA cost that rises and falls with how much you make.