← GlossaryFinance
Working Capital
The short-term capital a business needs to fund its day-to-day operations — inventory, receivables, and operational expenses.
Working capital = Current Assets − Current Liabilities. Positive working capital means you can fund operations without borrowing. Negative working capital means you need financing to bridge the gap.
Banks fund working capital through CC/OD limits (against stock and debtors), bill discounting (against invoices), and short-term loans. The working capital cycle — how quickly you convert raw materials to cash — determines how much you need to borrow. Reducing your debtors cycle by 15 days can free up significant cash.
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