Net operating working capital
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Net operating working capital (also known by its acronym, NOWC) is operating current assets minus operating current liabilities. Operating current assets are the current assets used to support operations, such as cash, accounts receivable, and inventory. They do not include short-term investments. Operating current liabilities are the current liabilities that area natural consequence ofthe firm's operations, such as accounts payable and accruals. They do not include notes payable or any other short-term debt that charges interest.
Definitions
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Net operating working capital (NOWC). Operating current assets minus operating current liabilities. Operating current assets are the current assets used to support operations, such as cash, accounts receivable, and inventory. They do not include short-term investments. Operating current liabilities are the current liabilities that area natural consequence ofthe firm's operations, such as accounts payable and accruals. They do not include notes payable or any other short-term debt that charges interest.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
