⁉️Question: Why isn’t cash part of working capital? ‼️Answer: In technical terms, Cash is a ‘Non-Operating Asset’ as opposed to items like Inventory, Accounts Receivable, etc. which are ‘Operating Assets’. In plain english terms, Cash is an output of the business and is not employed in the business’ operations. In contrast, an item like Accounts Receivable is directly employed in the business. 🤯Explanation: This is tricky for people who are new to Finance/Accounting, because the Accounting definition for Working Capital is Current Assets - Current Liabilities. And according to Accounting, Cash is a Current Asset. But the entire goal with analyzing Working Capital is to understand how much money is tied up in the business (aside from cash) in short-term assets/liabilities and so Cash is excluded. 𝗙𝗼𝗹𝗹𝗼𝘄 @survivefinance 𝗳𝗼𝗿 𝗮𝗹𝗹 𝘁𝗵𝗶𝗻𝗴𝘀 𝗙𝗶𝗻𝗮𝗻𝗰𝗲 💡𝗥𝗲𝗮𝗱𝘆 𝘁𝗼 𝗯𝗿𝗲𝗮𝗸 𝗶𝗻𝘁𝗼 𝗙𝗶𝗻𝗮𝗻𝗰𝗲? 𝗪𝗲 𝗼𝗳𝗳𝗲𝗿 𝗮 𝗯𝘂𝗻𝗰𝗵 𝗼𝗳 𝗳𝗿𝗲𝗲 𝗿𝗲𝘀𝗼𝘂𝗿𝗰𝗲𝘀 𝘁𝗵𝗮𝘁 𝗰𝗮𝗻 𝗵𝗲𝗹𝗽 𝘆𝗼𝘂 𝗴𝗲𝘁 𝗼𝗻 𝘁𝗵𝗲 𝗽𝗮𝘁𝗵. 🔗𝗦𝗲𝗲 𝗹𝗶𝗻𝗸 𝗶𝗻 𝗯𝗶𝗼 #investmentbanking #privateequity #financecareers #financejobs #lbo