1. What is Operating Working Capital?

Operating Working Capital (OWC) measures a company's operational efficiency and short-term financial health by calculating the difference between operating current assets and operating current liabilities.

2. How Does the Calculator Work?

The calculator uses the OWC formula:

Where:

• Current Assets — All assets expected to be converted to cash within one year
• Current Liabilities — All obligations due within one year
• Cash — Cash and cash equivalents
• Debt — Short-term debt obligations

Explanation: This calculation shows how much capital is tied up in the day-to-day operations of the business.

3. Importance of OWC Calculation

Details: OWC helps assess a company's liquidity position and operational efficiency. Positive OWC indicates the company can fund its current operations and invest in future growth.

4. Using the Calculator

Tips: Enter all values in the same currency unit. Values must be positive numbers representing the current financial position of the business.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between working capital and operating working capital?
A: Working capital includes all current assets and liabilities, while OWC focuses specifically on operational items, excluding cash and debt.

Q2: What is a good OWC value?
A: This varies by industry, but generally a positive OWC is desirable. The ratio should be compared to industry benchmarks.

Q3: How often should OWC be calculated?
A: Typically calculated quarterly with financial statements, but can be monitored more frequently for cash flow management.

Q4: Can OWC be negative?
A: Yes, negative OWC means the company is using supplier credit and customer prepayments to fund operations, which may be unsustainable long-term.

Q5: How does OWC relate to cash flow?
A: Changes in OWC directly impact operating cash flow - increases consume cash while decreases generate cash.