Net working capital

Definition

Net working capital is the difference between a company's current assets and its current liabilities. It measures a company's short-term financial health and its ability to cover its short-term obligations with its short-term assets.

Related terms

Current Assets: Assets that are expected to be converted into cash, sold, or consumed within one year or within the normal operating cycle of a business.

Current Liabilities: Financial obligations a company is due to pay within one year or within its normal operating cycle.

Liquidity: The ability of a company to meet its short-term financial obligations with its current assets readily convertible into cash