Overview

Net working capital (NWC) is the difference between a company's current assets and current liabilities on its balance sheet. It measures how liquid a company is and whether it is able to meet short-term obligations and fund the daily operations. Ideally, a company should have a positive net working capital balance in order to maintain its financial health. Net working capital can be calculated in different ways, depending on a company's definition of NWC and which items it wishes to include or exclude. Below are three different formulas for calculating NWC:

Net Working Capital = Current Assets - Current Liabilities or Net Working Capital = (Current Assets - Cash) - (Current Liabilities - Debt)

or

Net Working Capital = Accounts Receivable + Inventory - Accounts Payable

Reviews Add a review
No reviews yet

More From Corporate Finance Institute®

Browse our top rated business templates. See All
REIT Financial Model Template
13,842
33
This REIT financial model template acts as a guideline for modeling a real estate investment trust (REIT). This model will…
Energy Industry Comps Template Energy Industry Comps Template
11,925
813
This energy industry comps template provides a guideline and example of what a comparables universe would look like for a…
Financial Institution Dividend Discount Model
13,937
1104
The financial institution dividend discount model uses future dividends to find the implied share price. This model is based on…
Loan Payment Calculator
12,684
1299
The loan payment calculator allows users to determine the principal and interest payment each month until the full balance of…
DDM - Excel Dividend Discount Model Template
18,939
2661
The dividend discount model template allows investors to value a company base on future dividend payments. This is based on…
Non-directional trading strategy template Non-directional Trading Strategies Template
11,471
363
The non-directional trading strategies template allow users to determine the profit when buying options. This template focuses on non-directional strategies…
See All