Educational material from 
What you will learn
- Total the current assets actually included in the model.
- Subtract current liabilities to calculate working capital.
- Separate payment timing and cash from an accounting net amount.
SEK 40,000 of current assets, but only SEK 5,000 in cash
Our fictional business has cash of SEK 5,000, receivables of SEK 15,000 and inventory of SEK 20,000. We assume these are the model’s current assets and that there are no others. Their total is SEK 40,000. Current liabilities are SEK 25,000, giving working capital of 40,000 − 25,000 = SEK 15,000.
Customers still need to pay their receivables, and inventory needs to be handled or sold before corresponding money can enter the bank. We have no payment dates, sale prices or information about possible losses. Positive working capital of SEK 15,000 therefore does not prove every imminent bill can be paid immediately.
If the table does not fit, scroll it sideways.
| Item | Start | After customer payment | After supplier payment |
|---|---|---|---|
| Cash | SEK 5,000 | SEK 15,000 | SEK 5,000 |
| Receivables | SEK 15,000 | SEK 5,000 | SEK 5,000 |
| Inventory | SEK 20,000 | SEK 20,000 | SEK 20,000 |
| Current assets | SEK 40,000 | SEK 40,000 | SEK 30,000 |
| Current liabilities | SEK 25,000 | SEK 25,000 | SEK 15,000 |
| Working capital | SEK 15,000 | SEK 15,000 | SEK 15,000 |
The customer payment exchanges a receivable for cash
A customer pays SEK 10,000 of an invoice already recognised. Cash rises from SEK 5,000 to SEK 15,000, while receivables fall from SEK 15,000 to SEK 5,000. Inventory stays at SEK 20,000. Current assets are still SEK 40,000, and liabilities remain SEK 25,000.
Working capital stays at SEK 15,000, but more of the asset total now exists as cash. The net figure can remain unchanged while asset composition changes. The payment is not a new sale; we are simply following the settlement of an existing receivable.
The supplier payment reduces both sides equally
The business then pays SEK 10,000 of an already recognised supplier payable. Cash falls from SEK 15,000 to SEK 5,000. Current assets therefore decrease to SEK 30,000, and current liabilities decrease to SEK 15,000. Their difference remains SEK 15,000.
No new expense arises in the model at this payment because the underlying event was already recognised. The cash and liability balances change. Assuming a new expense at the same time would instead create a different model with different conditions. Follow each event using the same definition throughout.
A report’s classification does not replace a payment schedule
Read which assets and liabilities the report classifies as current and which balance-sheet date it uses. Definitions and the business’s normal operating cycle need checking in the underlying report. Cash availability and the timing of customer receipts may require separate information. Working capital is also a different concept from how easily a share can be bought or sold on a market.
Use the company-search guide for the right identity, then record the items from the business’s report. Continue to the cash-flow lesson for the distinction between earnings and payments. All figures here are fictional and calculated manually; they describe neither a special working-capital tool in Investiq nor a complete assessment of the company’s ability to pay.
Try it yourself
Another company has cash of SEK 4,000, receivables of SEK 6,000 and inventory of SEK 10,000. Current liabilities are SEK 18,000, with no other current assets in the model. What is working capital? Without payment dates, do you know all liabilities can be paid tomorrow?
Show the solution and explanation
Working capital is SEK 2,000. The information does not establish whether all liabilities can be paid tomorrow.
Current assets: 4,000 + 6,000 + 10,000 = SEK 20,000. Subtract liabilities: 20,000 − 18,000 = SEK 2,000. Cash is only SEK 4,000, and the timing for converting other assets into money is missing.
Check your understanding
Does working capital change when our customer settles the old invoice?
No. Cash increases by exactly the amount receivables decrease.
Is inventory always as available for payments as money in the bank?
No. Inventory is a different asset, and the task gives no timing or terms for a sale.
Practise with virtual money
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More lessons on this topic
Read company statements
Sources and examples
The sources support the factual explanations. Calculations and exercises were created for this lesson. Amounts and price changes are invented unless stated otherwise.
This material is educational and does not recommend securities to buy. A simulated result does not guarantee a future result.
