Net working capital is calculated by subtracting a company's current liabilities from its current assets.

For example, a company that generates positive net working capital consistently should have the financial viability to either make capital expenditures or obtain financing for capital expenditures.

A net investment in operating capital is often payments that come out of working capital. For example, let's say you want to purchase equipment.

Investors use free cash flow to help assess a company's performance and what lies ahead. Issues in free cash flow often ...

Learn why changes in net working capital (NPV) should be included in net present value calculations for analyzing a project's return on investment.

Net working capital and retained earnings are both important indicators of a company's health. Net working capital describes a company's liquidity -- how well it can pay its bills. Retained ...

Subtract current liabilities from current assets to get working capital. Learn more about how the working capital formula is used.

In a business acquisition, the buyer should receive sufficient net working capital, or (NWC), to operate the business in its ordinary course. The assessment and negotiation of NWC is important; ...

We’ve also seen negotiations in which the parties agree to a range (an up or down variance of $75,000, for example) of net working capital, to avoid last-minute recalculations and facilitate a ...

Coca-Cola and PepsiCo are interesting examples of excellent working capital management and consequently strong free cash flow. Read more on how to better assess these companies and others.

Net working capital is a useful tool for analyzing exactly what's driving a company from one year to the next.