Net Working Capital formula
\[ \text{Current assets} - \text{Current liabilities} \]
Terms
- Current assets, closing balance: Assets expected to turn into cash within a year: cash, short-term investments, receivables, inventory, prepayments.
- Current liabilities, closing balance: Obligations due within a year: trade payables, short-term borrowings, tax and payroll liabilities, accruals.
Result
Net Working Capital is an amount in currency. Higher is better.
Target
Negative net working capital means short-term obligations are partly financed by long-term sources, or not financed at all.
Net Working Capital pitfalls
- Not to be confused with operating (trade) working capital, which is receivables plus inventory minus trade payables and leaves out cash and financial debt.
Net Working Capital in Business Central
Current assets (closing balance)
- Category Current Assets (2) and every category below it
- Plus 10 accounts assigned directly: 15910 Current Receivable from Employees, 15920 Accrued income not yet invoiced, 15930 Clearing Accounts for Taxes and charges, 15940 Tax Assets, 15950 Current Receivables from group companies, 17100 Bonds, 17120 Decreases during the Year, 17200 Convertible debt instruments, 17300 Other short-term Investments, 17400 Write-down of Short-term investments
38 posting accounts in total.
The full account list is on the Current assets page.
Current liabilities (closing balance)
- Category Current Liabilities (11) and every category below it
- Category Payroll Liabilities (12) and every category below it
- Plus 8 accounts assigned directly: 23850 Employees Payable, 26100 Accrued wages/salaries, 26200 Accrued Holiday pay, 26300 Accrued Pension costs, 26400 Accrued Interest Expense, 26500 Deferred Income, 26600 Accrued Contractual costs, 26700 Other Accrued Expenses and Deferred Income
29 posting accounts in total.
The full account list is on the Current liabilities page.
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