What is operating working capital(OWC) / net working investment?
- FMV
- Apr 21, 2016
- 1 min read
Operating working capital, sometimes called net working investment is the same as working capital, but only includes those current assets and current liabilities that are driven by the trading operations of the business. Cash, short-term investments, overdraft / credit facilities and short-term debt are all driven by decisions made about cash management (which is not operational) and are therefore not included in the operating working capital calculation. Accounts receivable / debtors, Inventories / stocks and accounts payable / creditors are all examples of accounts driven by the day-to-day activities in which the business engages, which are operational.
Working Capital = Current Assets - Current Liabilities
OWC = Operating Current Assets - Operating Current Liabilities
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