Gross Working Capital

Updated on May 13, 2024
Article byWallstreetmojo Team
Reviewed byDheeraj Vaidya, CFA, FRM

Gross Working Capital Meaning

Gross working capital refers to the total current assets of the company, i.e., all the assets of the company that can be converted into cash within a year. Calculating the gross working capital helps firms learn about the cash flow available to them for a specific accounting period.


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Gross working capital  includes assets like accounts receivables, inventory of raw material, WIP inventory, finished goods inventory, cash, and bank balance, marketable securities such as T-Bills, commercial paper, etc. and short term investments. When firms know about the available capital, they can adopt measures to manage them effectively for profits.

Gross Working Capital Explained

Gross working capital concept refers to the set of working capital that can be converted to cash in a specific accounting period. Computing the total value of such capital allows firms to have an idea about their cash flow. By calculating this figure, they know how many assets are readily available to be converted into cash at a point in time.

The gross working capital is the total value of the current assets a company has. However, when the current liabilities are subtracted from these current assets, it generates the net working capital value, which is even more useful or a more practical metrics to assess the availability of the cash flow of a company.

It is difficult to ascertain the company’s liquidity position by gross working capital. It only considers the capital invested in the business for the short term, which can liquidate into cash within a year.

It does not account for the short-term financial obligations such as payments due to the raw material supplier, outstanding wages to the labor, or any other payment that is due to the company. Thus, for the liquidity of the company, we need to consider the net-working capital.

In short, the gross working capital may be a good way to assess the short-term financial state of the business, it cannot be trusted as a metrics for evaluating the exact position of the business. In fact, a company might have a good gross working capital to show in the record books and yet the company may be found suffering from a huge distress. Hence, total current assets adjusted to current liabilities should be considered, instead.

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Gross working capital comprises multiple elements, some of which are as follows:

  • Cash and cash equivalents: This is the amount that considers the cash in bank account, petty cash, and the investments for short terms, whatever has been made by the firm.
  • Accounts receivables: As the name implies, it is the amount that the company is to receive from its customer. Any amount due with other party is included in this category.
  • Inventory: This includes the total products and items to be sold. Whether it is the raw materials, or items required for production in the processing stage or the finished goods themselves, they are all included in the inventory category.
  • Marketable securities: These include financial assets that can be purchased and sold in the public market easily and hence, can be converted to cash whenever required. Such securities are – bonds, stocks, and mutual funds.


The mathematical expression that helps to calculate the gross working capital is given below:

Gross Working Capital Formula = Total Value of Current Assets

Gross Working Capital Formula = Receivables + Inventory + Cash and Marketable Securities + Short Term Investments + Any other Current Asset


Let us consider the following instance to understand what gross working capital means and to see how to calculate it:

Here are the excerpts of Apple Inc. from the annual 10k filing with US Securities and Exchange Commission:

Gross Working Capital Example 1


Based on the reported numbers, we can calculate the Gross working capital of Apple Inc. by adding all the company’s current assets.

Hence, the current assets of the company for the year ending Sept 2019 is worth the US $ 162,819 million.

Also, the company has short term obligations of US $ 105,718 million.

Thus the net-working capital of the company is US $ 57,101 million (Current Assets minus Current Liabilities. It indicates a healthy liquidity position of the Company as for every US $ 1 of financial obligation, the Company has 1.5 of value in total assets.


Gross Working Capital is mainly the total of the Company’s current assets, including account receivable, cash and cash equivalent, marketable securities, inventories, and other current assets that can be converted into cash within a year. If we reduce the short-term financial obligations of the company from the gross working capital, we get the value of the net-working capital of the company.

It does not represent the complete picture of the company’s liquidity and solvency position. Hence, it is not of much significance. However, analyzing the company’s Net-working capital is of great importance as it signals the ability of the company to meet its short-term financial obligations.

Let us have a pointwise listicle to have a quick look at the importance of these capital calculations in a firm:

  • It allows businesses to know the approximate amount of cash flow available.
  • The current financial obligations can also be figured out as the current liabilities are also included in the working capita gross value.
  • The net working capital can be computed when the gross counterpart is known.
  • Working capital gross value helps calculate working capital ratio, which indicates the exact financial position of the company.
  • Assessing the gross value of the working capital, investors can decide whether to invest in a firm and if yes, how much should the investment be.

Gross Working Capital vs Net Working Capital

Gross and net working capital are two concepts that play a significant role in determining the cash currently available with the companies. However, they differ from each other in various ways. Let us have a look at the difference between the gross working capital and net working capital below:

  • Gross Working Capital is the sum of all the current assets of the company, which can be liquidated within one year. On the other hand, Net working capital is the difference between current assets and the current financial obligation of the company.
  • Gross value of the working capital allows firms to assess the expected cash flow available with it in a particular accounting period. In short, it reflects the total funds available to finance assets as required currently. On the contrary, net working capital is more accurate in indicating whether the company has sufficient funds to meet its short term financial obligations, also known as current liabilities. When the value of the company’s current assets is higher than its current liabilities, it specifies a positive net working capital.  It means the company has a good liquidity position by having more assets to meet its liability. Contrarily, the negative networking indicates the company’s inability to meet its short-term financial obligations due to insufficient current assets.
  • Gross working capital is significant in financial management, while net working capital is evident when used in accounting systems.

This article has been a guide to Gross Working Capital and its meaning. Here, we explain its formula, vs net working capital, example, components, and importance.  You can learn more about financing from the following articles –

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