Working Capital

DefinitionWorking capital is the money a business needs to fund its day-to-day operations — current assets such as receivables and inventory, minus current liabilities such as payables. In an acquisition it is one of the most negotiated and most misunderstood terms: deals usually require the seller to deliver a normal level of working capital at closing, so the buyer isn’t forced to inject cash on day one just to keep the business running. Getting the target wrong quietly shifts hundreds of thousands of dollars.