If the scenario continues, it might finally be compelled to shut down. A firm has positive working capital if it has sufficient cash, accounts receivable and other liquid belongings to cover its short-term obligations, corresponding to accounts payable and short-term debt. Working capital as a ratio is significant when it is compared, alongside activity ratios, the working cycle and cash conversion cycle, over time and in opposition to a company’s peers. Taken together, managers and buyers acquire highly effective insights into the short term liquidity and operations of a enterprise. In this excellent storm, the retailer doesn’t have the funds to replenish the inventory that’s flying off the shelves because it hasn’t collected enough cash from customers.