The Income|Outcome^® Contextuary

Working Capital is the cash needed to run the business on a day-to-day basis: i.e. the cash needed to maintain inventories and pay expenses.

Calculation: Current Assets - Current Liabilities

Working Capital does not include machinery, land or buildings (those are Fixed Assets needed to run the business). Rather, it’s the rhythmic needs of the business: inventory builds up - then it is sold - then you wait for money to come in from sales - pay bills - buy more inventory - and start all over again.

See also Working Capital Ratio

Also known as Net Working Capital.

See also Non-Cash Working Capital.

See Discussion of Working Capital on the Income|Outcome Blog.