What is Working Capital?

The question: what is working capital?

Working capital is a concept or an idea rather than a precise mathematical construct. Essentially working capital is the answer to the question: "How much short term funding do you need to operate this business?"

There are some ways of estimating working capital (see "How is working capital calculated?") but each is an estimate of the short term funding required to operate the business.

Short term funding is important in a transaction because, with long term funding in place to buy the business, the business still needs short term funding to operate. Without the short term funding, post deal the business will go bankrupt.

About training company FTA Ltd

FTA Ltd is a company that provides finance-related CPD training courses to law, accountancy, banking and financial services professionals. See www.cpd-courses.org for more information.