Working Capital

How working capital works

Current assets can include cash, stock and receivables, while current liabilities include obligations due within the operating cycle or relevant reporting period. A positive accounting figure does not show when stock will sell or customers will actually pay.

Practical UK business example

A business has £90,000 of current assets and £60,000 of current liabilities, giving £30,000 of net working capital. It may still struggle with payroll if most assets are slow-moving stock.

Illustrative example only; not a finance quotation or a client case study.

Why it matters

Understanding both the balance-sheet measure and cash timing helps a business choose a facility that fits its trading cycle rather than masking a continuing loss.

Limitations and common misconceptions

Working capital is not the same as profit or cash at bank. Borrowing adds liquidity but can also create another liability; it does not automatically improve net working capital.

Discuss business borrowing or Explore invoice finance to discuss how the structure relates to your business.