Net Working Capital (NWC)

Net working capital measures the difference between a business’ short-term assets and its short-term liabilities. Used to assess a company’s ability to pay its short-term debts like daily operating costs, interest payments, and taxes, net working capital is a good measure of a company’s liquidity and financial health.

The formula for net working capital is as follows:

Short-Term Assets – Short-Term Liabilities = Net Working Capital