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# Net Operating Working Capital Calculator

What is net operating working capital?How to calculate the net operating working capitalFAQs

With this net operating working capital calculator, we aim to help you measure a company's liquidity. You can use our quick ratio calculator and current ratio calculator to understand more about the liquidity of a company.

We have written this article to help you understand what the net operating working capital is and how to calculate the net operating working capital using the NOWC formula. We will also demonstrate some examples to help you understand the calculation.

## What is net operating working capital?

Net Operating Working Capital (NOWC) is a financial metric that measures a company's short-term liquidity by subtracting its current operating liabilities from its current operating assets. You can use our working capital calculator to understand more about this topic.

NOWC is important because it provides insight into a company's ability to meet its short-term operating expenses. A positive NOWC indicates that a company has enough liquid assets to meet its short-term liabilities. In contrast, a negative NOWC indicates that a company may struggle to meet its short-term obligations.

## How to calculate the net operating working capital

To understand how to calculate the NOWC calculation, let's take Company Alpha as an example:

• Cash: $1,000 • Accounts receivables:$15,000
• Inventories: $5,000 • Accounts payable:$18,000
• Accrued expenses: $2,000 You can calculate net operating working capital in three steps: 1. Determine the current operating assets First, you need to calculate the current operating assets of the company, which include cash and accounts receivable. current operating assets = cash + accounts receivables + inventories Hence, Company Alpha's current operating assets is $1,000 + $15,000 +$5,000 = $21,000. 2. Compute the current operating liabilities Second, you need to calculate the current operating liabilities of the company, which include accounts payable and accrued expenses. current operating liabilities = accounts payable + accrued expenses The current operating liabilities of Company Alpha will be $18,000 + $2,000 =$20,000.

3. Calculate the NOWC by using the net operating working capital formula

The final step is to calculate the NOWC by applying the net operating working capital formula:

NOWC = current operating assets - current operating liabilities