1. What is Net Working Capital?

Net Working Capital (NWC) is a financial metric that measures a company's short-term liquidity by subtracting current liabilities from current assets. It indicates whether a company has enough short-term assets to cover its short-term debts.

2. How Does the Calculator Work?

The calculator uses the NWC formula:

Where:

• Current Assets — Cash and other assets expected to be converted to cash within one year (accounts receivable, inventory, etc.)
• Current Liabilities — Debts and obligations due within one year (accounts payable, short-term loans, etc.)

Interpretation: A positive NWC indicates the company can cover its short-term liabilities, while a negative NWC suggests potential liquidity problems.

3. Importance of NWC Calculation

Details: NWC is crucial for assessing a company's operational efficiency and short-term financial health. It helps creditors evaluate creditworthiness and managers monitor cash flow.

4. Using the Calculator

Tips: Enter current assets and current liabilities in your local currency. Both values must be positive numbers. The calculator will display the difference between them.

5. Frequently Asked Questions (FAQ)

Q1: What's a good NWC value?
A: Generally, positive NWC is good, but optimal levels vary by industry. Compare to industry averages for better context.

Q2: How is NWC different from working capital ratio?
A: NWC is an absolute amount (assets minus liabilities), while the working capital ratio is assets divided by liabilities.

Q3: Can NWC be too high?
A: Yes, excessively high NWC may indicate inefficient use of resources (e.g., too much inventory or idle cash).

Q4: How often should NWC be calculated?
A: Typically calculated quarterly with financial statements, but can be monitored more frequently for cash management.

Q5: Does NWC include cash equivalents?
A: Yes, cash and cash equivalents are included in current assets for NWC calculations.