OWC
Operating Working Capital
Short definition
Operating working capital is trade receivables plus inventory minus trade payables. Cash and financial debt are out; it measures cash tied in the procure–make–collect cycle.
Detailed explanation
This cut is consistent with CCC: days × daily sales or COGS map to the OWC amount. Advances, contract assets and non-trade payables move OWC depending on the definition; lock it.
An OWC increase is a cash outflow, a decrease an inflow. Stretching suppliers cuts OWC and creates cash, but raises DPO and supply risk.
Why it matters for the CFO
The short-term funding need and any cash-conversion programme lock onto this amount. EBITDA can rise while an OWC build wipes out free cash.
How it is calculated
OWC = Ticari alacak + Stok − Ticari borç
Variables in the formula
- OWC: Trade receivables + inventory − trade payables
How to read it
OWC / sales shows how much cash each 1 TL of sales ties up. It varies by sector and season; low OWC is not always virtue (stock-outs, aggressive DPO).
Numerical example
Receivables 80, inventory 70, trade payables 40 mn TL → OWC = 110 mn TL. Sales 400 mn TL → OWC/sales = 27.5%.
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Definitions are educational. They are not investment, credit or tax advice.