Financial Terms Glossary

Working Capital

Formal

A term describing a range of shorter term company Assets and Liabilities that allows the business to trade. Included in here are cash balances, debtors, stock, which are all 'assets', and creditors, short term loans and other obligations which are 'liabilities'. If assets exceed liabilities then the company has positive working capital and has the ability to trade. More liabilities than assets means that the company could run out of cash, and trade could stop. Therefore - a key measure for company health and survival.

Informal

The cash and funds that allow businesses to work from day to day. Cash and Stock is needed to pay people and supply goods. Debtors and Creditors arise from goods and services supplied that are not yet paid for. This term describes refers to the aggregation of all these different ingredients. Where the net of these is positive - it provides the ability to trade in healthy and structured fashion, whereas a negative result could mean that bills cannot be paid, supplies could stop, and business halts.

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