Financial Glossary
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Days Working Capital
- An accounting and finance term used to describe how many days it will take for a company to convert its working capital into revenue. The faster a company does this, the better.
To calculate days working capital, the following formula can be used:
Days working capital can be used in ratio and fundamental analysis.
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Trade Working Capital
- The difference between current assets and current liabilities directly associated with everyday business operations.
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Working Capital
- A measure of both a company's efficiency and its short-term financial health. The working capital ratio is calculated as:
Positive working capital means that the company is able to pay off its short-term liabilities. Negative working capital means that a company currently is unable to meet its short-term liabilities with its current assets (cash, accounts receivable and inventory).
Also known as "net working capital", or the "working capital ratio".
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Working Capital Loan
- A loan whose purpose is to finance everyday operations of a company.
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Working Capital Management
- A managerial accounting strategy focusing on maintaining efficient levels of both components of working capital, current assets and current liabilities, in respect to each other. Working capital management ensures a company has sufficient cash flow in order to meet its short-term debt obligations and operating expenses.
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Working Capital Turnover
- A measurement comparing the depletion of working capital to the generation of sales over a given period. This provides some useful information as to how effectively a company is using its working capital to generate sales.
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