Cheat sheet: Working capital, and getting your ratio right
Working capital is vital for every business — quite simply, if you don’t have enough, it can be a problem, regardless of how profitable you’re going to be in the future.
Here’s what you need to know, plus some working capital solutions to help you bridge any gaps.
What is working capital?
Working capital is the cash — or cash equivalent — your business has available at any given time, minus the money you owe this year.
How do I work out my working capital?
Working capital is calculated by subtracting your current liabilities from your current assets. So, for example, if you have $24,000 of current assets and $18,000 of current liabilities, your working capital would be $6000.