Working capital concepts (finance)
There are two main types of working capital - net working capital and gross working capital. When the accountants use the word working capital they generally mean the net working capital, which is the dollar difference between the current assets and the current liabilities. It is a measure to the extent of which the firm is protected from liquidity issues. However from the management viewpoint it does not make much of a sense to talk about managing the net difference between current assets and current liabilities when that difference is continuously changing.
On the other hand, financial analysts mean current assets when they talk about working capital. As a result their focus is on gross working capital. It makes a lot of sense to the financial manager to constantly provide with the correct amount of current assets for the firm at all times.
