Definition · working capital
Net working capital
Net working capital is current assets minus current liabilities, used to understand short-term operating resources and how balance-sheet changes affect cash. For net working capital, the useful boundary is the source cash view, timing horizon, owner, liquidity exposure, and operating decision before payment timing, runway, or financing options change.
Also known as NWC, net working capital ratio
Why it matters
Understanding net working capital matters because cash decisions are time-sensitive. Teams need to know when money moves, which balance changes, who owns the next action, and what can still be changed before liquidity tightens. Pluvo computes net working capital from the underlying current accounts and shows how each movement hit cash, traceable to source.
In practice
Liquidity example
Finance teams use net working capital when they need to understand cash timing before a decision is made. A team might compare expected receipts, payroll, vendor payments, and debt obligations to decide what action is needed this week.
Pluvo example
Pluvo computes net working capital from the underlying current accounts and shows how each movement hit cash, traceable to source.
In practice, teams should define net working capital with a clear source, owner, time period, and decision before they use it in reporting, planning, or operating reviews.
Understanding net working capital matters because cash decisions are time-sensitive. Teams need to know when money moves, which balance changes, who owns the next action, and what can still be changed before liquidity tightens. Pluvo computes net working capital from the underlying current accounts and shows how each movement hit cash, traceable to source.
A strong workflow for net working capital separates the definition from the action: first agree what the term means, then decide how it is measured, when it changes, and who is accountable for the next step.
Pluvo computes net working capital from the underlying current accounts and shows how each movement hit cash, traceable to source.
FAQ
What is net working capital?
Net working capital is current assets minus current liabilities, used to understand short-term operating resources and how balance-sheet changes affect cash. For net working capital, the useful boundary is the source cash view, timing horizon, owner, liquidity exposure, and operating decision before payment timing, runway, or financing options change.
How does a change in net working capital affect cash flow?
To use net working capital, start with the decision, then confirm the source data, timing, calculation logic, and owner. The analysis is strongest when a reviewer can trace the answer back to the records that produced it.