This illustrated glossary uses Visual Finance™ to provide a contextualized 'big picture' view of financial results. The examples feature data for the Round Number Company—a 'made-up company' with simplified figures. The Appendix presents an explanation of how to read Visual Finance as well as the financial statements and VF views for the Round Number Company.
Net Working Capital is the cash needed to run the business on a day-to-day basis--to maintain inventories and pay expenses.
Calculation: Current Assets less Current Liabilities.
Example: The Round Number CompanyCurrent Assets = 112; Current Liabilities = 36 Net Working Capital = 112 - 36 = 96 |
Net Working Capital does not include machinery, land or buildings (those are Fixed Assets needed to run the business). Rather, it’s the rhythmic needs of the business: inventory building up then being sold, waiting on money to come back in from sales, paying bills, renewing inventories, and starting all over again.
Also called Working Capital.
See also non-Cash Net Working Capital.
See discussion of Working Capital on the Income|Outcome Blog.
The above is our generic explanations of common corporate financial terminology. Actual meanings can vary widely from company to company; in order to have the correct internal definition you need to ask your Finance Department, "What do you mean by that?"
term list.