Gross Working Capital

Gross Working Capital Explanation

Gross working capital refers to a company's total current assets within a fiscal year. This includes cash, inventory, accounts receivable, and other short-term assets. It's a measure of a company's short-term financial health and operational efficiency. 

The Gross Working Capital formula is simply: 

Gross Working Capital = Current Assets 

However, it's important to note that gross working capital doesn't account for current liabilities, and may not accurately reflect a company's financial status. Therefore, it's advised to also assess the firm's Net Working Capital. 

Calculating Gross Working Capital

To calculate gross working capital, sum all current assets held within a 12-month period. This includes: 

Gross working capital = current investments + cash + accounts receivable + short-term assets + inventory + commercial papers + other current assets 

Also, consider the company's current liabilities for a more thorough financial analysis. 

Gross Working Capital Example 

Let's look at an example: 

Cash = Rs. 55,000 

Accounts receivable = Rs. 10,000 

Current investments = Rs. 80,000 

Commercial papers = Rs. 25,000 

Other current assets = Rs. 5,000 

Gross working capital = Rs. 55,000 + Rs. 10,000 + Rs. 80,000 + Rs. 25,000 + Rs. 5,000 

Gross working capital = Rs. 1,75,000