Glossarytaught in M2.04
Working capital release
Also called release of working capital, working capital inflow.
Cash generated by shrinking the money tied up in the operating cycle: collecting receivables faster, holding less stock, or paying suppliers later.
It's real cash. It just doesn't come round again. A firm that reports ₹785 crore of operating cash flow of which ₹300 crore came from a one-off inventory reduction has an underlying run rate closer to ₹485 crore.
Releases cluster in downturns, so operating cash flow can look strong in the very year trading was weakest. Sales fall, so receivables and inventory fall with them, and the balance sheet hands back cash it absorbed during the growth years.
Strip the working capital line out of operating cash flow before extrapolating anything. What is left is what the business earns. The rest was the balance sheet handing cash back.
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