Working capital is a measure of financial health that reflects the amount of money available to a business for daily operations. It is calculated by subtracting current liabilities from current assets. This tells you how much cash a business has at its disposal for day-to-day activities.

Net working capital, on the other hand, takes into account not just cash but all forms of liquid and nonliquid assets—such as inventory, debtors, accounts receivable, etc.—that are used to support daily operations. In other words, it’s the total amount of resources available in case of sudden expenses or investment opportunities. To calculate net working capital, take the difference between total current assets and total current liabilities. If the result is positive, then your working capital is said to be “healthy”; if negative, then it is “unhealthy”.