Net Operating Working Capital (NOWC) is a critical measure of a company’s financial health, used to assess its liquidity and operating efficiency. In simple terms, it measures the difference between a company’s current assets and current liabilities – i.e., the money they need to finance their day-to-day activities. The equation itself is calculated by subtracting current liabilities from current assets: NOWC = Current Assets – Current Liabilities. In other words, if your current assets exceed your current liabilities, you have positive net operating working capital – which suggests a healthy level of financial flexibility and stability. By monitoring this figure regularly, you can better manage credit risk and optimize cash flow, helping your business thrive in today’s ever-changing marketplace.