Working capital
Working capital is the difference between current assets and current liabilities: what a company will collect or turn into cash within the year, minus what it must pay over the same period. It measures the cushion it has for its short-term commitments. Negative working capital is not always a bad sign: supermarkets collect on the spot and pay suppliers at ninety days, financing the business on precisely that gap.
How it is calculated
Working capital = current assets − current liabilities. That is, what the company expects to turn into cash within the year minus what it has to pay within the year. With 450 M€ of current assets and 380 M€ of current liabilities, working capital is 70 M€: there is a cushion. Its trend matters more than its level. If it grows because inventory is piling up unsold or customers are not paying their invoices, it is deteriorating even though the number rises; which is why it should be read alongside days sales outstanding and days inventory, which say where it comes from.
The figures in the example are invented and rounded so the arithmetic can be redone by hand. They are not data from any real company.
What it is not
More is not better. A very high working capital can be capital parked in warehouses or unpaid invoices, which is money not working. And a negative one is not automatically an alarm: supermarkets get paid in cash and pay their suppliers at sixty days, so they run structurally negative working capital and are perfectly healthy. What is being judged is the business model, not the sign.
In the terminal
Income statement, balance sheet and cash flows by fiscal year or quarter, with the change in every line and its trend.
See the full glossary · What the Celsmar financial terminal is
Definition for informational purposes. It is not financial advice nor a recommendation to buy or sell.