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Cash & working capital
Working capital
Current assets less current liabilities — the cash tied up in running the business day to day: receivables and inventory, less the payables that fund them.
Owned by: AnalystTest band: Analyst
The formula
Working capital = Current assets − Current liabilities
In practice
Growth eats working capital: more sales means more receivables and stock before the cash arrives. A growing profitable business can still run out of cash here.
The kind of thing the test asks
- Current assets $500k, current liabilities $320k. Working capital is…
- Revenue grows 50% next year with unchanged DSO and DIO. Working capital will…
More in cash & working capital
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