What is your working capital?

Asked a year ago

Hello and good morning. What is an example of working capital? I understand what capital in a business s, but working capital? And how is it calculated?

Ruben Dickson

Monday, May 16, 2022

You can determine your working capital by deducting your current liabilities from current assets. Mathematically it can be written as:

Working Capital = Current Assets - Current Liabilities

Banks use the capital adequacy ratio (CAR) to assess their capital adequacy in relation to potential risks and losses. Calculating the capital adequacy ratio requires a division of capital into two categories. The formula for calculating CAR is:

CAR = (Tier 1 Capital + Tier 2 Capital​) / Risk-Weighted Assets

Abeeha Qasmi

Monday, May 30, 2022

Working capital or Net Working Capital (NWC) is the difference between the company's current assets and current liabilities. It is a financial metric that represents a company's operating liquidity position. If the NWC is positive, it means the firm is in a place to grow and invest.

However, if the current liabilities exceed current assets, then the company might face financial difficulties like failure to pay its creditors. The formula for calculating working capital is subtracting current assets from current liabilities.

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