Net Working Capital (Nwc) Definition
Net Working Capital (Nwc) refers to the difference between a company’s current assets and current liabilities. It is a measure of a company’s financial health and its ability to pay creditors.
A company’s Nwc can be positive or negative. A positive Nwc means that the company has more assets than liabilities, and a negative Nwc means that the company has more liabilities than assets.
A company’s Nwc can also be used as a measure of its liquidity, or its ability to meet its short-term obligations. A company with a high Nwc is typically considered to be more liquid than a company with a low Nwc.
The calculation for Nwc is simple: it is the sum of a company’s current assets minus the sum of its current liabilities. However, interpreting what this number means can be difficult.
On one hand, a high Nwc could be seen as a good thing, because it indicates that the company has the resources to pay its bills and meet its obligations. On the other hand, a high Nwc could also be seen as a bad thing, because it might mean that the company is not using its resources efficiently and could be carrying too much debt.
Ultimately, whether a high or low Nwc is good or bad depends on the specific circumstances of each individual company.
