Understand the difference between net working capital and capital expenditures. Then, calculate net working capital.
- [Instructor] Net working capital, or NWC, is the cash…that Richards has tied up in day-to-day operations.…As the company grows, it'll need more…and more cash, that's obvious.…For example, you may need to invest a bit more in marketing,…or provide more services, maybe set up a website,…or you many need to increase your inventory.…A number of things may be required that need financing.…The NWC is the cash that's dedicated…to that part of the business.…In its most basic form, it's used to measure…the short-term liquidity of the business.…It's equivalent to current assets minus current liabilities.…
We don't use cash in this calculation.…An increase in current assets represents…an investment of cash which decreases available funds.…Analogously, a decrease in current liabilities represents…a use of cash, which also decreases available funds.…Decreases in current assets and increases…in current liabilities increase available funds.…Let's look at the equation again.…I'll go ahead and finish bolding it out…so that we know that we've covered all the steps.…
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- Explain the four different types of financial statements.
- Distinguish between the types of moving averages.
- Determine a seasonal adjusted trend.
- Break down pro-forma financial statements.
- Identify cash flows, and what increased liabilities and decreased earnings generally indicate.
- Tell what a regression is.
- Outline the naive approach.