## Answers the Question

Can we pay off our short-term debts with items that can quickly be turned into cash?

## Calculator for Net Working Capital

## What Is the Net Working Capital?

Net working capital is a measure of corporate liquidity. The larger the value, the more able a firm is to pay off its current debts quickly and easily.

Firms suffering from a negative net working capital value are deemed to have a working capital deficit.

## Why Is it Important?

- The more able a firm is to deal with its short-term debts, the more able it is to take advantage of opportunities that come up and deal with small obstacles that deviate from normal experiences.

## Formula(s) to Calculate Net Working Capital

- NET WORKING CAPITAL = CURRENT ASSETS - CURRENT LIABILITIES

## Common Mistakes

- Assuming that just because net working capital looks good, that long term debts are also able to be dealt with efficiently. A firm may be loaded with long-term debt but have significant working capital.