Meaning and formula
Under the common balance-sheet definition, net working capital equals current assets less current liabilities. It shows the resources tied to the current operating cycle after near-term obligations are taken into account. Valuation models sometimes use operating working capital, excluding cash and interest-bearing debt; that is a different analytical construct.
Illustrative calculation
If a hypothetical company has current assets of 300,000 roubles and current liabilities of 180,000 roubles, net working capital is 120,000 roubles. However, a significant part of that amount may be held in slow-moving inventory or overdue customer receivables rather than in a bank account.
Interpretation limits
A positive figure does not guarantee solvency, and a negative figure does not always indicate a crisis: some businesses receive payment before settling with suppliers. Before comparing companies, establish the same calculation components, seasonality and asset quality. The term does not mean the company’s total equity.