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Definition of Net Working Capital

What is Net Working Capital?

Net Working Capital is the liquidity ratio which measures the company’s ability to pay its liabilities with its current assets. For the investors, creditors, and management this is a very important measurement because by using this ratio they find the short term liquidity of the company and management’s efficiency of using company assets.

Definition of Net Working Capital

If the company cannot pay the liability with its current assets within 12 months then the company need to sell its long term assets for the payment of obligations because of which company’s sales decreases and the company has the financial problem.

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