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what is net working capital

what is net working capital

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Answer #1

Net working capital is the aggregate amount of all current assets and current liabilities. Its is used to measures the short term liquidity of the business. It is also used to measures company management ability to utilize the Company's assets in a efficient manners. If a company has substantial working capital, then it should have the ability to grow and invest but if the current assets is less than the current liabilities then it means it have trouble in growing and paying back creditors amount. The net working capital is difference between current assets and current liabilities.

Net Working Capital = Current Assets - Current Liabilities

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