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)


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
Financial Institution Dividend Discount Model
The financial institution dividend discount model uses future dividends to find the implied share price. This model is based on…
Loan Payment Calculator
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
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
The non-directional trading strategies template allow users to determine the profit when buying options. This template focuses on non-directional strategies…
restructuring financial model template preview 1 Restructuring Financial Model Template
This restructuring financial model template is used to demonstrate the financial interactions behind the restructuring process. Adjust this model to…
TMT Financial Model Template Preview TMT Financial Model Template
This TMT financial model template is used to value technology, media, and telecom firms. This model provides a template to…