Wednesday, September 17, 2008

What is Net Working Capital?

Net Working Capital is the difference between current assets and current liabilities. Circulating capital is the flows of value within a production organization. Includes stocks of raw material, work in process, finished goods inventories, and cash on hand needed to pay workers and suppliers before products are sold.

There is not a technical difference between working capital and circulating capital, but the word circulating gives you a better feel for what happens in the cash cycle.

Accounting Example:

Net Work Capital (NWC)= Current Assets- Current Liabilities

$500= $2000-$1500.

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