The cash tied up in running the business day to day: receivables and stock, less what is owed to suppliers. Growth consumes it, deals argue over it, and forecasts routinely forget it.
Profit is an opinion about a period. Working capital is where the cash actually sits while that opinion is being formed, and businesses fail on the second while reporting the first.
Last reviewed 3 July 2026 · Free and ungated
Operators who have funded growth and settled completion accounts can pressure-test where the cash actually goes.
Review this before committingWorking capital is the difference between current assets and current liabilities: broadly, customer receivables plus inventory, minus supplier payables. It represents the cash the operating cycle absorbs between paying for inputs and being paid for outputs. A business with sixty-day customer terms and thirty-day supplier terms is funding a month of its own sales, permanently, and more of it as revenue grows.
Two live situations turn on it. Growth cases first: a plan that doubles revenue usually doubles the working capital that revenue sits in, and a business case that models the profit without the funding requirement presents growth as self-financing when it is not. Then transactions: because completion mechanisms adjust the price against a normalised working capital target, the definition of "normal" becomes a negotiation of its own, worth real money to whichever side wins it.
The month before measurement is when working capital behaves strangely. Payables stretched, invoicing accelerated, stock run down below operating levels: each flatters the snapshot while borrowing from the months after completion, when the buyer owns the consequences. Inside organisations the same games appear at year end, where a division improves its reported position by leaning on suppliers whose patience was funding it all along.