Equity · Core
Working Capital
Working capital is current operating assets minus current operating liabilities — the cash tied in the operating cycle.
Definition
NWC ≈ receivables + inventory − payables (cash and short debt usually excluded). Growth in NWC is a use of cash. Negative NWC (collect cash before you pay suppliers) can fund growth — until suppliers revolt.
Why it matters
Earnings that sit in inventory or receivables are not spendable. Cash conversion and ‘quality of earnings’ are working-capital stories.
Case
A wholesaler ‘beats’ on revenue by stuffing channels. Receivables days jump, CFO lags NI, and the beat reverses next quarter.
How to read it
Watch days sales, days inventory, and days payables together. A one-line NWC change without the three days is incomplete.
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