Working capital
Working capital is current assets less current liabilities, a measure of net short-term resources. Working capital links short-term resources to obligations. Track inventory, receivables and payables separately to understand how operating decisions affect cash. For example, faster customer collections can reduce receivables and increase cash without necessarily changing total working capital immediately. A business should also consider the timing of cash receipts and liability payments.
Worked example
Current assets 500 less current liabilities 300 give working capital of 200.
Common mistake
A positive amount does not guarantee liquidity: inventory and receivables may not convert to cash before liabilities fall due.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | K1 | Supporting | July 2027–August 2028 |
| CIMA | F1 | Direct | Official assessment-window verification pending |
| FIA | FFA | Direct | September 2026–June 2027 |
