Working Capital - Launchopedia

In accounting terms, it is the difference between current assets and current liabilities that can be turned into cash. Positive Working Capital means that the company has sufficient liquid assets to cover its short term liabilities (expenses).⁶

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Tony Lettich

Tony Lettich has previous Business Analysis, Business Valuation, M&A, and Venture Capital experience and currently serves as the Managing Director of The Angel Roundtable and a Partner in Sheehan, Lettich M&A Advisory. He is also a co-founder of FundingSage, which provides valuable information, tools and resources to entrepreneurs seeking to launch and build startups.

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Expenses

The cost a business incurs during operations in order to generate revenue. In normal circumstances, most of these are cash expenses; examples include wages, payments to vendors, and rent. Other expenses are non-cash, like depreciation, which decreases net revenue, but is not a cash outlay. These are governed by FASB and IRS accounting standards.⁶

Working Capital

Capital

Financial capital is a term that can refer to the money exchanged between entrepreneurs and investors during a business deal. Entrepreneurs need to raise capital for their startups while investors can provide them with the needed capital (or funding). Financial capital usually comes with interest, and new business owners can use their financial capital in purchasing real capital (or machinery or equipment) for their new business.⁴

Assets

This word refers to all financial resources that a corporation owns. Current assets can be any form of currency, including traded inventory, investments, and checks. Fixed assets (capital assets) consist of material goods and equipment of a company, such as the land by which the company sits on, the company building, and technological machinery. Intangible assets mainly comprise of intellectual property protection, copyrights, patents, etc.⁴

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INFOGRAPHICS

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