Working Capital

What is Working Capital?

Working capital is the finance employed in a business which is utilised to carry out it’s normal day to day trading operations. It is the net liquid assets of a business. In a simple business it would be calculated as inventory + accounts receivable – accounts payable representing the funding needed to buy inventory and provide credit to customers reduced by the amount of credit obtained from suppliers.

For further information on working capital see our post on the working capital calculation and the Wikipedia definition.

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Last modified April 1st, 2019 by Michael Brown

About the Author

Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years in all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.

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