Course · Act II: The Three Statements · Chapter 11
Working capital
Working capital, and how changes in receivables, inventory and payables make operating cash flow differ from net income (the indirect method).
Key terms
- Working capital
- Current assets − current liabilities. The cash tied up in day-to-day operations.
- Indirect method
- Operating cash flow = net income + non-cash costs ± changes in working capital.
“Working Capital” is part of the full course: 6 puzzles on working capital, with a story that carries through all five acts. Try this act’s free chapter, “The Income Statement”, first.