Fundamental Glossary / Financial Statements
Net Working Capital
Current assets minus current liabilities. The accounting measure of the short-term cushion.
Formula
Current assets - current liabilities.
What it means
Net working capital is positive when current assets exceed current liabilities. It is the same number as the numerator surplus behind a current ratio above 1.
Analysts sometimes redefine it to exclude cash and short-term borrowings, and then still call the result net working capital. Ask which version is on the page.
How to read it
A stable positive balance means the firm can meet near-term claims from near-term assets, on paper. Liquidity still depends on how fast those assets turn into cash.
What to watch
A positive figure full of obsolete inventory is weaker than a smaller figure full of cash and current receivables. Composition beats the single total.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.