Cash is the money genuinely available. It depends on one central concept: working capital requirement.

Understanding working capital requirement

Working capital requirement is the money « locked up » in the operating cycle. A company pays its suppliers and builds inventory before its customers pay it. That gap has to be funded.

• Inventory: money tied up in goods.
• Customer receivables: sales made but not yet collected.
• Trade payables: the payment terms obtained, which ease the requirement.

A simple formula: working capital requirement = inventory + receivables − payables. The higher it is, the more cash the company must advance just to operate.

Key takeaway: cutting inventory, getting paid faster and negotiating supplier terms reduces working capital requirement and frees up cash.