How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Dimitry K., Esq. Your Own Question
Dimitry K., Esq.
Dimitry K., Esq. , Attorney
Category: Finance
Satisfied Customers: 41220
Experience:  NASD Licensed Rep, 1997-2001, Business Attorney
18572087
Type Your Finance Question Here...
Dimitry K., Esq. is online now
A new question is answered every 9 seconds

What does a decrease in net working capital mean?

A "net working capital" is an evaluation the company's efficiency and short-term financial health, and is calculated by subtracting current liabilities from current assets. A decrease signifies that the health of the company is potentially deteriorating and that there is less cash on hand for capital expenditures. This can be a potential red flag and can point to situations where the sales or services of the company are decreasing, which ends up affecting the net working capital.

Read full interaction below »

Resolved Question:

What does a decrease in net working capital mean?

Submitted: 3 years ago.
Category: Finance
Expert:  Dimitry K., Esq. replied 3 years ago.

A "net working capital" is an evaluation the company's efficiency and short-term financial health, and is calculated by subtracting current liabilities from current assets. A decrease signifies that the health of the company is potentially deteriorating and that there is less cash on hand for capital expenditures. This can be a potential red flag and can point to situations where the sales or services of the company are decreasing, which ends up affecting the net working capital.

Customer: replied 3 years ago.

What does an increase mean?

Expert:  Dimitry K., Esq. replied 3 years ago.

An increase in net working capital may mean that the company is not running in the most efficient manner possible, as collections may not be getting obtained properly, or that the company is providing more services, selling more goods, and is improving profitability.

Dimitry K., Esq. and other Finance Specialists are ready to help you