EUR 140,000 working capital—is that enough for Primex?
At 6.4 days of revenue with stable terms, yes short term. If the 45-day client grows share, model AR need before accepting new lanes.
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Working Capital
Working Capital: plain-English definition, formula, worked example, how to interpret the result, peer-based benchmark guidance, common mistakes, and management actions in the ZBI Business Control Library.
What is Working Capital?
Working capital is current assets minus current liabilities—the euro cushion (or gap) your operations fund day to day. It is not cash alone and it is not long-term debt capacity. At Primex Logistics d.o.o. in Rijeka, EUR 280,000 current assets minus EUR 140,000 current liabilities is EUR 140,000 working capital. I express it in euros and as days of revenue because growth inflates the euro number even when discipline is unchanged.
Why Working Capital matters
Every euro tied in receivables, inventory, or early payables is a euro not available for fleet renewal, depot rent, or absorbing a client loss. When revenue grows 20% but working capital grows 35%, you are self-funding expansion through the balance sheet—often until the overdraft maxes. Carriers feel it as deferred trailer maintenance; clients feel delayed credit terms on new lanes. Owners feel it when the business 'looks profitable' but cannot fund payroll without drawing the facility. Working capital is where P&L success meets treasury reality.
Formula and variables
Working Capital = Current Assets − Current Liabilities
Current assets — cash, receivables, inventory, and other items due within one year.
Current liabilities — payables, short-term borrowings, and near-term accruals.
Excel: =B2-B3 — B2 current assets, B3 current liabilities.
Real business example
Primex Logistics d.o.o., a EUR 8M regional freight and warehousing operator in Rijeka, closes March: current assets EUR 280,000; current liabilities EUR 140,000. Working capital = 280,000 − 140,000 = EUR 140,000. Daily revenue approximates EUR 22,000—working capital covers about 6.4 days of sales. March last year was EUR 118,000 (5.1 days)—the increase traces to EUR 35,000 higher fuel receivables from one retail client on 45-day terms and EUR 12,000 spare-parts inventory for the fleet. The CFO assigns commercial to renegotiate that client's terms before Q2 volume adds another EUR 20,000 to AR.
How to interpret the result
Working capital shows the balance-sheet euro gap operations must finance.
- Express as days of revenue to compare across growth and acquisitions.
- Bridge month-to-month: receivables, payables, inventory, cash—each line needs an owner.
- Negative working capital can work in prepayment models; dangerous when it means supplier stress.
- Link working capital targets to S&OP and credit policy, not only to finance close.
Benchmark context
Asset-light logistics firms often target 5–10 days of revenue in net working capital; inventory-heavy peers need more. Benchmark your own trailing twelve months and the working capital assumption in your annual budget. Two consecutive quarters above plan usually signals DSO or DIO drift before covenant ratios move.
Red flags
- Working capital days up 30% year-on-year while revenue up 10%—self-funded growth unsustainable.
- Positive working capital but facility constantly at limit—assets not liquid.
- Working capital fell because payables overdue to fuel and tyre suppliers—quality of improvement poor.
- Acquisition closed without working capital true-up—seller left excess AR in the entity.
- Bonus paid on EBITDA while working capital ballooned—cash will follow profit down.
Common mistakes
- Tracking euro working capital only without days-of-revenue context during growth.
- Treating supplier term stretch as sustainable working capital improvement.
- No named owner on AR, AP, or inventory lines in the monthly bridge.
- Ignoring working capital need in project bids with 60-day client payment.
- Combining entities with different terms into one working capital number without segment view.
What should management do next?
- Publish monthly working capital bridge with named owners on AR, AP, and inventory.
- Set days-of-revenue target in the annual budget and review in monthly management accounts.
- Include working capital impact in pricing for extended client payment terms.
- Tie commercial credit approvals to rolling DSO by client tier.
- Run thirteen-week cash flow alongside working capital every tight quarter.
Related calculators
Related analyzers
Related templates & software
Related KPI pages
Related blog articles
FAQ
Is negative working capital always bad?
No for prepayment or fast-turn models with supplier terms. Bad if it means chronic supplier delays and allocation risk.
How should the board see working capital?
Euros and days of revenue, with a one-page bridge and three actions— not a single number without context.
Who owns the working capital bridge?
CFO publishes; sales owns DSO actions, procurement owns DPO policy, ops owns fleet spares inventory—names on each line.
Working capital improved—why is cash still tight?
Improvement from stretching payables or drawing debt is not cash generation. Check thirteen-week cash and facility headroom.
Summary
Working capital is the euro gap between short-term assets and liabilities. Track euros and days, bridge the move monthly, and tie commercial terms to the cash the business must fund.
Reviewed by ZBI Business Control Library · Last updated 2026-06-15