Working capital
The difference between short-term operating assets and liabilities.
Plain languagePractical exampleConnected reading
01
What is it?
The difference between short-term operating assets and liabilities.
02
Why does it matter?
Movements in inventory, receivables and payables can materially change cash conversion.
03
How should it be read?
Read balances with sales growth, collection days and payment days.
04
Common mistake
Assuming any increase automatically improves liquidity.
A simple example
Operating cash may weaken when receivables and inventory grow faster than payables.