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.