In this video on Net working capital, we are going to discuss the formula to calculate net working capital with some practical examples.

𝐍𝐞𝐭 𝐖𝐨𝐫𝐤𝐢𝐧𝐠 𝐂𝐚𝐩𝐢𝐭𝐚𝐥.
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Net Working Capital calculation is done by adding the Current assets and reducing the current liabilities.
It simply denotes short term liabilities of a firm.

𝐅𝐨𝐫𝐦𝐮𝐥𝐚 𝐭𝐨 𝐂𝐚𝐥𝐜𝐮𝐥𝐚𝐭𝐞 𝐍𝐞𝐭 𝐖𝐨𝐫𝐤𝐢𝐧𝐠 𝐂𝐚𝐩𝐢𝐭𝐚𝐥
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Net Working Capital = Total Current Assets - Total Current Liabilities


𝐄𝐱𝐚𝐦𝐩𝐥𝐞 𝐨𝐟 𝐍𝐞𝐭 𝐖𝐨𝐫𝐤𝐢𝐧𝐠 𝐂𝐚𝐩𝐢𝐭𝐚𝐥
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Ross Company has the following information

Sundry Debt - $65000
Sundry Credit - $55000
Inventory - $50000
Prepaid salary - $25000
Outstanding adds - $10000

Here we need to find out the Net Working capital of Ross Company.

Here we have current assets and current liabilities.
So we need to separate the current assets from current liabilities.

So First we will total the current assets and current liabilities as well. And then we will find the difference between both.

Current Assets = (Sundry Debtors + Inventories + Prepaid salaries)

= ($65,000 + $50,000 + $25,000)

Current Assets =$140000

Current Liabilities = (Sundry Creditors + Outstanding advertisements)

= ($55,000 + $10000)

Current Liabilities =65000

Net Working Capital is

Total Current Assets – Total Current Liabilities

= $140000 - $65000

Net Working Capital = $75000

To know more about 𝐍𝐞𝐭 𝐖𝐨𝐫𝐤𝐢𝐧𝐠 𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐅𝐨𝐫𝐦𝐮𝐥𝐚, you can go this link here:- https://www.wallstreetmojo.com/net-working-capital/

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