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LogoutWorking capital, also known as net working capital (NWC), is the difference between a company’s current assets and liabilities, such as cash, accounts receivable (unpaid invoices from customers), and raw materials and completed goods inventories. The gap between operating current assets and operating current liabilities is referred to as net working capital (NWC). These estimates are often the same and are based on business cash plus accounts receivable plus inventory, minus accounts payable, and less accrued expenditures.
Working capital is a metric that measures a business’s liquidity, operational efficiency, and short-term financial health. If a firm has a significant amount of positive working capital, it should be able to invest and develop. If a company’s present assets do not equal its current liabilities, it may struggle to expand or repay creditors, and may even go bankrupt.