What Is Working Capital and Why Do Changes in It Matter?

Working capital measures the short-term operating resources tied up in a business. Changes matter because a profitable company can still consume cash, need financing, or miss projections when receivables, inventory, and payables move unexpectedly.

Author: Ishaan Nair Updated 5 min read

What working capital means

Broadly, working capital equals current assets minus current liabilities. Bankers, however, usually focus on operating net working capital: short-term assets and liabilities created through normal business operations.

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