Working capital broadly means current assets minus current liabilities at a particular date. Operating analyses often use the narrower definition of inventory plus trade receivables minus trade payables.[1] Specify the definition: the resulting currency amounts need not be equal and neither is a margin percentage.
Additional stock and slow customer collections can tie up more funds in a merchant's trade cycle. Profit does not automatically remove that funding need. Review payment terms and inventory quality too; a high inventory book value is not immediately available money for paying suppliers.
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Compiled with AI assistance using public sources. General explanation, not individual legal or tax advice. Describing a concept does not mean Zoloo offers it as a feature.