Just call us Bond. Amortized bond.
Over 700 finance terms, Shmooped to perfection.
The difference between a company's current assets and its current liabilities. This number shows how liquid the company is: dDes the business have enough money on hand to pay for stuff right now or are they paying suppliers with rolled coins?
Working capital is a delicate balance. Too low and the company will struggle to pay the bills. Too high and the company might not be using its assets to its best advantage.
Okay, you're at the prototypical lemonade stand, whose lemonade has to cure for exactly 100 days before it's just bitter enough to be called Miss Havisham's Lemonade.
You know that you sell on average 500 glasses a day, so you have to stockpile the lemonade for 3+ months before the day comes when you'll serve it. And bitter lemonade ain't free. In fact, it costs you about a dime a glass, with all the sugar you use to combat the bitterness. Even at just a dime, that's 50 bucks a day (a dime times 500 glasses) times 100 days. It totals to $5,000 of stored lemonade.
Then there's the fridge you have to rent to keep it cold. And insurance. And cups. And a whole bunch of other stuff. How'd you get the 5 going on 10 grand in cash to pay for all of this? Well, you may have borrowed it.