Working capital is one of the most difficult financial concepts to understand for the small-business owner. Working capital is, in a nutshell, what cash you have each month to cover any expenses. While it’s easy enough to explain, applying it to your business on a daily basis isn’t so simple, because it’s always changing.

​

Working capital is a measure of both a company’s efficiency and its short-term financial health. Decisions relating to working capital and short-term financing are referred to as working capital management. These involve managing the relationship between a firm’s short-term assets and its short-term liabilities. The goal of working capital management is to ensure that the firm is able to continue its operations and that it has sufficient cash flow to satisfy both maturing short-term debt and upcoming operational expenses. The management of working capital involves managing inventories, accounts receivable and payable, and cash.

 

Contact ZenFinance chartered accountants team today to learn more about working capital management analysis.