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# What Is the Meaning of Gross Working Capital?

## How to Calculate Gross Working Capital?

Gross working capital is a simple concept. It is basically the value of the short-term assets of the company along with its cash assets. Hence, the formula is going to be something like this:

Gross WC = Total CA

Here,

WC means Working Capital

CA mean Current Asset

Total CA = short-term investment + inventory + receivable + marketable security + cash + any other CA

Let’s understand this concept of gross working capital with the help of an example.

Suppose XYZ is an organisation. And here is the updated balanced sheet of the company.

 XYZ Private Limited Assets Amount Liabilities and Shares Amount Cash and equivalent  Accounts receivable Inventory  Short-term investment 1,00,000 50,000 10,000 20,000 Accounts payable  Accrued expense  Deferred revenue  Short-term borrowing 20,000 8,000 5,000 17,000 Total Current Assets 1,80,000 Total Current Liabilities 50,000

As you can see, the current asset value of the company is ₹ 1,80,000 which is equal to the gross working capital. But that only represents half of the picture. If we minus the total current liabilities from the total current assets, which is the net working capital of the company, it will be ₹ 1,30,000. Considering this, the company seems to have good financial health.

## Difference Between Gross Working Capital and Net Working Capital

Here are some basic differences between gross and net working capital to grasp the concept of each more clearly.

 Parameter Gross Working Capital Net Working Capital Nature Quantitative in nature Qualitative in nature Depict Finances Cannot reflect the actual financial health of the company Helps in finding out the actual financial health of the company Purpose Helpful in financial management Helpful in accounting Result Only shows the total fund available to finance current assets Shows the company’s ability to meet its operating expenses and current liabilities
This article discussed in detail what gross working capital is and how it helps an organisation to identify its immediate future actions. Hopefully, the difference between gross and net working capital will be able to clear any doubt regarding either of those.