Net Operating Working Capital Calculator
Calculate a company's short-term liquidity by measuring current operating assets minus current operating liabilities
Calculate Net Operating Working Capital
Current Operating Assets
Cash and cash equivalents
Money owed by customers
Raw materials, work-in-progress, finished goods
Current Operating Liabilities
Money owed to suppliers
Wages, salaries, utilities, rent
Net Operating Working Capital Results
Formula: NOWC = Current Operating Assets - Current Operating Liabilities
Calculation: $0 - $0 = $0
Financial Analysis
Example: Company Alpha
Current Operating Assets
Cash: $1,000
Accounts Receivable: $15,000
Inventories: $5,000
Total Operating Assets: $21,000
Current Operating Liabilities
Accounts Payable: $18,000
Accrued Expenses: $2,000
Total Operating Liabilities: $20,000
Net Operating Working Capital
NOWC = $21,000 - $20,000
NOWC = $1,000
Key Components
Operating Assets
Cash, receivables, inventory
Resources for daily operations
Operating Liabilities
Payables, accrued expenses
Short-term operating obligations
NOWC Result
Net liquidity measure
Company's operational efficiency
Interpretation Tips
Positive NOWC indicates good short-term liquidity
Negative NOWC may signal liquidity challenges
Compare NOWC across industry peers
Monitor NOWC trends over time
Understanding Net Operating Working Capital
What is NOWC?
Net Operating Working Capital (NOWC) measures a company's short-term liquidity by calculating the difference between current operating assets and current operating liabilities. It excludes cash and interest-bearing debt to focus purely on operational efficiency.
Why is NOWC Important?
- •Measures operational liquidity more accurately than working capital
- •Indicates company's ability to fund operations
- •Helps assess short-term financial health
- •Critical for cash flow management
NOWC vs Working Capital
Working Capital: Current Assets - Current Liabilities
NOWC: Operating Assets - Operating Liabilities
NOWC excludes cash and interest-bearing debt, providing a clearer view of operational liquidity and management efficiency.
Interpretation Guidelines
Positive NOWC: Company can meet short-term obligations
Negative NOWC: Potential liquidity concerns
Industry Comparison: Compare with industry averages
Trend Analysis: Monitor changes over time