Net Operating Working Capital
A traditional measure of a company’s liquidity and potential for growth. Net operating working capital is defined as non-interest bearing current assets minus non-interest charging liabilities:
Net operating working capital = current assets - current liabilities
Generally, net operating working capital is equal to cash, accounts receivables, and inventories less accounts payable and accruals. Currently, the traditaional definition does not include either natural or human capital in its calculation, which enables companies to bypass these measures when assessing their performance. This makes it easy for corporations to ignore the lack of efficiency in their use of natural of human resources.
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I think that faster a business expands, the more cash it will need for
working capital and investment. The cheapest and best sources of cash exist as working capital right within business. Good management of working capital will generate cash will help improve profits and reduce risks. Bear in mind that the cost of providing credit to customers and holding stocks can represent a substantial proportion of a firm's total profits.