What is net working capital?

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Net Working capital, more commonly known as working capital, refers to the difference between a company's current assets (less cash) and its current liabilities (less funded debt). It's a key measure of a company's operational efficiency and its short-term financial health. Understanding working capital is crucial during the sale process, as it affects the valuation and can be a point of negotiation with buyers. Effective management of working capital ensures that a business can meet its short-term obligations and continue operations smoothly.

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