Working capital

Working capital is normally defined as the excess of current assets over current liabilities.

It represents the day to day capital requirement to continue the operations of the organisation.

In very simple terms, it can be calculated as:

Stock

ADD: Trade debtors

LESS: (Trade creditors)

= Working capital

This working capital requirement has to be financed by borrowings, shareholders' funds, or a combination of both of them.

See also

• Capital
• Cash flow statement
• Efficiency ratio
• Liquidity management
• Over trading
• Supply chain finance
• Working capital management