Net Working Capital

One-line definition

Net Working Capital (NWC) = Current operating assets − current operating liabilities, excluding anything already captured in Net Debt.

Why TS cares

Buyers require the business to be sold with a normal level of working capital — enough to run day-to-day operations. The TS team builds a reference NWC (usually a twelve-month average), and the closing statement compares actual NWC to this reference. Any shortfall adjusts the final price.

Typical build

• In: trade receivables, inventories, prepayments.
• Out: trade payables, accruals, customer deposits.
• Exclude: cash, debt, tax balances, intercompany — those live in Net Debt.

Watch-outs

• Seasonality distorts monthly averages — use a full year or weighted month-end average.
• One-offs (e.g., a large stock build before a product launch) should be normalised out.
• Classification — make sure an item doesn't get double-counted in both NWC and Net Debt.