Net working capital
from class: Principles of Finance Definition Net working capital (NWC) is the difference between a company's current assets and current liabilities. It measures a company's short-term liquidity and operational efficiency.
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Predict what's on your test 5 Must Know Facts For Your Next Test Net working capital is calculated as Current Assets - Current Liabilities. A positive NWC indicates that a company can cover its short-term liabilities with its short-term assets. NWC is crucial for day-to-day operations and smooth business functioning. Trade credit terms can significantly impact a company's net working capital. Effective management of NWC involves balancing inventory, accounts receivable, and accounts payable. Review Questions What is the formula to calculate net working capital? Why is positive net working capital important for a business? How does trade credit affect net working capital? "Net working capital" also found in:
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