Operating working capital narrows the scope of Current assets and Current liabilities by strictly taking into account Operating Current Assets (Accounts Receivable and Inventory) and Current Liabilities (Accounts payable). Compared to Working capital, it does not take into account Cash & Securities or Interest Bearing Liabilities like Short Term Debt or Current portion of Long Term Debt. It is a better indicator of the amount of liquidity that is immediately available.

  Calculation Rules
Operating working capital
= Accounts receivable + Inventory - Accounts payable
= [Current assets - Cash & Securities] - [Current liabilities - Interest bearing current liabilities]

with Interest bearing current liabilities = Short term debt + Current portion of long term debt

The basic concept of working capital is relatively simple : it is the excess of current assets over the current liabilities. The importance attached to working capital as a measure of liquidity and solvency has caused some companies, desiring to present their current condition in the most favorable light, to stretch the definition of what constitutes a current asset and a current liability. For this reason some analysts will use the operating working capital as a substitute to the Working Capital.

Accounts payable
Accounts receivable
Cash & Securities
Current assets
Current liabilities

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