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Non-Cash Working Capital

Department:

Finance

Non-Cash Working Capital

$

Calculation

Non-Cash Working Capital = (Current Assets - Cash and Cash Equivalents) - Current Liabilities

DESCRIPTION

Non-Cash Working Capital refers to a company's current assets excluding cash and cash equivalents, less current liabilities. It often represents the company's investments in inventory and receivables required to maintain business operations.

Purpose

The purpose of Non-Cash Working Capital is to measure the company's efficiency in using its short-term assets (excluding cash) to cover short-term liabilities, indicating the operational liquidity without relying on cash reserves.

Interpretation

Did you get it right

Optimal:
Suggests efficient management of inventory and receivables, indicating good operational liquidity and the ability to fund ongoing operations without cash.
Alert:
May indicate excess inventory or receivables, which can tie up funds and affect the company’s short-term financial flexibility.
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06/15/2024 04:47:31 am