What does working capital mean?
Working capital is the money tied up in running the business day to day. It is current assets minus current liabilities.
Current assets include stock (inventory), and bills customers have not yet paid (receivables). Current liabilities include bills the company has not yet paid its suppliers (payables).
What makes something current?
An asset is current if it should turn into cash within twelve months or one operating cycle. Debts follow the same test.[S1]
The operating cycle is the time from buying materials to collecting cash from the sale.[S1]
Why does it change cash flow?
When stock or unpaid customer bills grow, cash gets stuck in them. Cash from operations then comes in below profit.
When working capital shrinks, the opposite happens. That is why the examples below show cash from operations next to net profit.
Where do you find it in a filing?
The balance sheet lists current assets and current liabilities. The cash flow statement shows each year's change in working capital.
Some annual reports add a ratio of sales to working capital. Saksoft's FY26 report includes one, called net capital turnover.[S2]