Why it matters
Customer debts and stock can absorb cash before a business collects the related sales. Supplier credit may partly fund that interval. Understanding the cycle helps explain why fast growth can require more money even when margins are sound. Look at the quality and timing of balances, not just whether the calculated total is positive.
A practical example
A wholesaler buys stock, stores it, sells it on credit and collects the customer payment later. More sales may require more stock and a larger debtor balance before additional cash arrives. Changes in purchasing terms or collection times can therefore affect funding needs.
A common misunderstanding
A positive working-capital total does not guarantee immediate liquidity. Stock may be slow to sell and customer debts may be disputed. Use an aged-debt review, stock analysis and cash forecast to understand how those balance-sheet amounts turn into usable money.
General information for UK readers, updated 3 November 2026. Examples are illustrative. Tax treatment depends on the facts and current rules; seek advice before making a decision.