Working Capital

The money tied up in day-to-day operations: current assets like receivables and inventory minus current liabilities like payables. It funds the gap between paying costs and collecting revenue.

Working capital = current assets - current liabilities

Why it matters

Working capital can quietly starve a growing company of cash, especially in inventory or services businesses where you pay before you get paid. Managing it well can matter as much as growing revenue.

For example

A hardware startup pays suppliers upfront but collects from retailers 90 days later, tying up 50 lakh of working capital just to keep operating.

Related terms

Accounts Receivable Accounts Payable Cash Flow

Go deeper

See how founders actually handle this on Money, pricing and metrics, part of the Starting Up hub.

eChai Partner Brands