Net Working Capital (NWC)
Current Assets − Current LiabilitiesNWC measures the short-term liquidity of the business. It represents the difference between what the business owns in the near term and what it owes in the near term.
How it's used in a deal
A typical acquisition includes a normalized level of working capital. Deviations from this level may result in purchase price adjustments at closing.
Worked example
Fictional Precision Auto Service, FY 2024. Missing inputs remain unavailable.
Net working capital: Not available. One or more working-capital balances are missing from the selected balance sheet.
Inputs and supported results from our fictional sample deal report — Fictional, incomplete example. No real customer documents, verified source support or independent accountant review are supplied.
Important caveat
Negative NWC may indicate liquidity concerns. However, some business models (e.g., subscription) naturally operate with negative NWC.
Frequently asked questions
What is a working capital peg?
A negotiated 'normal' level of working capital the seller must deliver at closing. If the business closes with less, the price adjusts down; with more, up. Without a peg, a seller can quietly drain receivables and inventory before handing you the keys.
Is negative working capital always bad?
No — businesses that collect cash up front (subscriptions, deposits) run negative NWC by design. It's a red flag when a business that should carry receivables and inventory shows negative NWC, which can signal stretched payables or a liquidity crunch.
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Educational content from a decision-support tool — not a CPA audit, review, or assurance engagement, and not tax, legal, or investment advice.