# How to Calculate Net Working Capital?

A short tutorial on how to calculate the financial term of Net Working Capital with simple example.

## Net Working Capital Formula

The Net working capital is the liquidity calculation which measures the ability of a company or firm to pay all its current liabilities based on the current assets. The net working capital is generally the impression of how well the company manage to utilize its assets in an efficient manner. Learn here how to calculate Net Working Capital with the sample example problems. Net Working Capital Formula:
The net working capital can be calculated by subtracting the total current liabilities from the total current assets.
Net Working Capital = Current Assets - Current Liabilities

Where,
Current Assets is the cash or other terms of assets which are expected to converted into cash within one year.
Current Liabilities is the amounts or due to be paid to creditors within a year. Net Working Capital Example:
Step 1:
Aashik owns and operates a retail shop that has the following current assets and liabilities
Cash: \$20,000
Accounts Receivable: \$3,000
Inventory: \$25,000
Accounts Payable: \$10,500
Accrued Expenses: \$5,500  