Working Capital = Current Assets − Current Liabilities. Current assets include cash, accounts receivable, and inventory. Current liabilities include accounts payable, VAT payable, and short-term debt. Positive working capital means the business can meet its near-term obligations. Negative working capital is a warning sign of liquidity stress. In the UAE, working capital management is particularly challenging for SMEs dealing with large corporates and government entities that impose 60–90 day payment terms while expecting SME suppliers to pay their own vendors in 30 days. This working capital gap — slow receipts, fast payments — is the most common financial pressure on growing UAE businesses.
Pro tip: Calculate your 'cash conversion cycle': the average number of days it takes to turn a sale into collected cash (AR days) minus the days you take to pay your suppliers (AP days). A high positive number means your working capital needs grow as your revenue grows — plan for this before it becomes a crisis.
