Choose the definition that matches the question
| Measure | Boundary | Use it for | Do not infer |
|---|---|---|---|
| Net working capital | Current assets − current liabilities under the stated reporting definitions | A broader balance-sheet comparison | That every current balance is operationally available or interchangeable |
| Margin101 operating requirement | Receivables + inventory − payables | A current-versus-proposed operating balance scenario | Whole-business liquidity, solvency or an optimal balance |
| Cash conversion cycle | Receivable days + inventory days − payable days | Operating timing in days | A currency amount or exact payment schedule |
| 13-week cash schedule | Dated receipts and payments rolled weekly | Near-term cash timing and buffer gaps | Accounting profit or a payment guarantee |
Reconcile all six planner balances
- Current receivables at one stated balance date. (not complete)
- Current inventory at the same date and valuation basis. (not complete)
- Current payables at the same date and classification basis. (not complete)
- Proposed receivables under one explicit operating change. (not complete)
- Proposed inventory with service and supply consequences stated. (not complete)
- Proposed payables under commercially and contractually available terms. (not complete)
- One currency and indirect-tax basis across every balance. (not complete)
cash released = (current receivables + current inventory − current payables) − (proposed receivables + proposed inventory − proposed payables)
- receivables
- Customer balances included in the selected operating boundary (currency at one balance date) — business record or user scenario
- inventory
- Inventory balance included on the matching valuation basis (currency at one balance date) — business record or user scenario
- payables
- Supplier balances included on the matching classification basis (currency at one balance date) — business record or user scenario
- cash released
- Signed current requirement less proposed requirement (currency) — engine-derived user scenario
A positive result means the proposed operating requirement is lower; a negative result means the scenario consumes cash. The sign is not a recommendation.
Interpret the engine-derived signed result
Current and proposed operating balances
The figures are fictional user assumptions in generic currency units at one balance date. They are not a benchmark or optimal plan.
| Balance | Current | Proposed | Scenario interpretation |
|---|---|---|---|
| Receivables | 100,000 | 85,000 | 15,000 lower receivables balance |
| Inventory | 70,000 | 65,000 | 5,000 lower inventory balance |
| Payables | 45,000 | 50,000 | 5,000 higher payables balance |
| Operating requirement | 125,000 | 100,000 | 25,000 currency units released by the signed scenario |
Work one lever at a time and route the next question
| Lever | Trade-off to preserve | Next owner |
|---|---|---|
| Receivables | Customer terms, disputes, collection process and sales relationship | Receivables Collection Impact Planner |
| Inventory | Availability, lead time, order economics and service level | Cash Conversion Cycle or inventory workflow |
| Payables | Contract, supplier relationship, continuity and cost | Cash Conversion Cycle; qualified advice when rights are unclear |
| Exact receipt/payment date | Near-term obligations and buffer timing | 13-Week Cash-Flow Forecast |
| Inventory days + receivable days − payable days | Use a consistent period, sales and COGS basis, and reconciled balance records; do not mix periods or denominators | Cash Conversion Cycle for the timing-in-days scenario; fewer days do not guarantee released cash |
Working-capital questions
- Is negative working capital always bad?
- No universal conclusion follows without the exact definition, business model, balance composition and dates. The Margin101 operating result is a narrower signed scenario, not a diagnosis.
- Is cash released the same as profit?
- No. It is the decrease in the selected operating balance requirement between two user scenarios. It may involve service, supply, customer or supplier trade-offs and does not create accounting profit.
- When should cash-conversion-cycle days be used instead?
- Use the cycle when the decision concerns operating timing in days. Use the balance planner for a currency change and a 13-week schedule when exact dates and near-term buffer gaps matter.
Sources and methods
- Margin101 Working Capital methodology — Margin101: Operating requirement, signed cash-release formula, fixture and limitations.
- Margin101 Cash Conversion Cycle methodology — Margin101: Consistent-period inventory, receivable and payable day definitions and limits.
- Financial ratios — Business Queensland: Broader current-assets/current-liabilities and current-ratio context; no benchmark is imported.