What is Working Capital

posted Jul 17, 2012, 3:42 PM by Andrey Mozuliov   [ updated Jul 24, 2013, 10:16 PM ]

In day-to-day operations a company buys raw materials from its supplier. Materials flow in manufacturing in order to be converted into the final product. Finished goods go to the warehouse until a truck delivers them to a client. After the client pays off his account, the initially put into the cycle dollar returns to company.

That operating cycle renews permanently within the life of the company.

Cash that fuels the process turns in cycles which we call Cash Cycle or Cash Conversion Cycle.

The amount of money that Cash Conversion Cycle encompasses is the Working Capital, and if you are the owner of the company, it is your money.

If you count how much money you have trapped in your business, you might want to turn the valve and release some money driving them back into your pockets.


Also, watch the video definition for the Working Capital: 


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