What's NWC?

What is NWC?

• Net working cost

• Not worth capital

• New worth cost

• Net working capital

Answer explanation

Net working capital = Current Asset - Current Liabilities

Mario Ltd., our customer, was billed for MS#1 downpayment of $50k on 24 Jul 2023 with 30 days payment term.

What would you do as of today (7 Aug 2023)?

• Do nothing

• Promptly follow through the payment

• Issue legal letter

Answer explanation

Ensure complete documents are available for invoicing, send to customer on time and follow up on collection on or before it becomes overdue

What are the actions that will improve NWC?

• Increase advances to suppliers

• Drive trade receivables down

• Get maximum advances from customers

• Urgent payment to suppliers

• Reduce sales in excess through invoicing

Order received $1,000k

Plan cost $700k

Gross margin $300k

Invoice billed to date $200k

Actual cost to date $300k

Trade receivable $100k

Trade payable $100k

In this situation, how is it impacting NWC?

• NWC -$329k

• NWC +$229k

• NWC +$329k

• NWC -$229k

Answer explanation

Revenue = 429k (300k / 700k x 1000k)

SIE = Revenue 429k - Invoice bill to date 200k = 229k

SIE 229k + Trade receivable 100k - Trade payable 100k = NWC +229k

Does today's session help you to understand NWC and how you can contribute?

• Yes

• No

• I'm not sure