working capital

Beginner 💰 Finance / Accounting

Definition

Current assets minus current liabilities—the money available to fund daily operations without selling the furniture. Positive working capital means you can pay your bills; negative means start selling that furniture.

Example Usage

The company's working capital shrank to nearly zero, forcing them to negotiate payment terms with increasingly nervous suppliers.

Origin

Emerged as a formal concept in early 20th-century corporate finance as businesses grew more complex.

Fun Fact

Some high-velocity businesses like Amazon have famously operated with negative working capital by getting paid before paying suppliers—turning the cash conversion cycle into a profit center.

Source: Corporate finance fundamentals

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