Working capital management focuses on ensuring the company can meet day-to-day operating expenses while using its financial resources in the most productive and efficient way.Positive working capital means the company can pay its bills and invest to spur business growth.Working capital is a financial metric calculated as the difference between current assets and current liabilities.Current liabilities include accounts payable, taxes, wages and interest owed. Current assets include cash, accounts receivable and inventory. Working capital is calculated by subtracting current liabilities from current assets, as listed on the company’s balance sheet. While cash flow measures how much money the company generates or consumes in a given period, working capital is the difference between the company’s current assets - including cash and other assets that can be converted into cash within a year - and its current liabilities, such as payroll, accounts payable and accrued expenses.Ī business that maintains positive working capital will likely have a greater ability to withstand financial challenges and the flexibility to invest in growth after meeting short-term obligations.

These two metrics illustrate different aspects of a company’s financial health. East, Nordics and Other Regions (opens in new tab)įinance teams that want to know whether their companies can withstand an unexpected downturn or crisis need a handle on two metrics: working capital and cash flow.

Operational working capital turnover