working capital
Học thuậtThân thiện
Definition
Noun: - The liquid assets a company has available to fund its day-to-day operations and short-term obligations. It represents the difference between a company's current assets (like cash, inventory, and receivables) and its current liabilities (like debts and payables). This capital is "working" because it is actively used in the core business cycle to generate revenue.
Usage
This term is used in business, finance, and accounting contexts to discuss a company's operational liquidity and financial health. - It is typically used as an uncountable noun (e.g., "sufficient working capital"). - It is often discussed in terms of being "positive" (assets > liabilities) or "negative" (liabilities > assets).
Examples
- The new loan was secured to boost the company's working capital for the upcoming expansion.
- A key challenge for the startup is managing its working capital to cover monthly expenses.
- The accountant analyzed the balance sheet to calculate the firm's net working capital.
Advanced Usage
- "Tied up in working capital": Describes when too much cash is locked in inventory or unpaid invoices, limiting financial flexibility.
- Too much cash is tied up in working capital, slowing our ability to invest in new equipment.
- "Working capital management": Refers to the strategies a company uses to monitor and optimize its current assets and liabilities.
- Effective working capital management is crucial for maintaining cash flow.
Variants and Related Words
- Net working capital (NWC): A more precise term calculated as Current Assets minus Current Liabilities.
- Working capital ratio (Current Ratio): A financial metric (Current Assets / Current Liabilities) used to assess liquidity.
- Capital: A broader term for the financial resources (money or assets) owned or available to a business.
Synonyms
- Liquid assets: Assets that can be quickly converted into cash.
- Operating capital: Capital used for the daily operations of a business.
- Circulating capital: An older term emphasizing capital used in the recurring business cycle.
Related Phrases
- "To finance working capital": To provide funds specifically for operational needs.
- The line of credit is used to finance seasonal working capital requirements.
- "Working capital cycle": The time it takes for a business to convert net current assets and liabilities into cash.
- Shortening the working capital cycle improves cash flow.
Noun
- assets available for use in the production of further assets