what is gross working capital 
gross working capital is the sum of a company s current assets assets that are convertible to cash within a year or less gross working capital less current liabilities is equal to net working capital or simply working capital a more useful measure for balance sheet analysis understanding gross working capitalgross working capital in practice is not useful it is just one half of a picture of a company s short term financial health and the ability to use short term resources efficiently the other half is current liabilities gross working capital or current assets less current liabilities equates to working capital when working capital is positive it means that current assets are greater than current liabilities the preferred way to express positive working capital is the ratio of current assets to current liabilities e g 1 0 if this ratio is less than 1 0 then a company may have trouble paying back its creditors in the short term negative working capital is when liabilities outstrip assets and indicate that a company may be in distress a company needs just the right amount of working capital to function optimally with too much working capital some current assets would be better put to use elsewhere with too little working capital a company may not be able to meet its day to day cash requirements managers aim for the correct balance through working capital management some methods in which a company can improve its working capital ratio include a reduction in time to collect receivables from customers extending payable time frames with suppliers a reduction on the reliance on short term debt and appropriately managing inventory levels gross working capital is used to gauge a company s liquidity as it helps assess a company s short term ability to meet debt obligations it is less of a gauge of solvency or the long term financial health of a company gross working calculationgross working capital includes assets such as cash accounts receivable inventory short term investments and marketable securities unlike net working capital gross working capital omits liabilities and only focuses on what the company owns gross working capital is the sum of current assets including like other financial measurements gross working capital is most useful when tracked over time or compared against competing companies example of gross working capitalan examination of gross working capital versus current liabilities provides many insights into a company s operations the changes in the components of current assets and liabilities from period to period can lead to further financial analysis to assess the short run financial condition of a company sometimes there may be a surprise to an investor that a working capital ratio fell below 1 0 breaking down the components and following the money would explain why for example company abc reported gross working capital of 7 billion at the end of the fourth quarter of 2021 versus 7 23 billion in current liabilities for a working capital ratio of 0 97 the bulk of current liabilities is coming from the short term debt of 3 billion at the end of the third quarter of 2022 abc had paid off its entire 3 billion in debt without taking on more debt gross working capital stood at 7 8 billion and current liabilities stood at 5 billion resulting in a working capital ratio of 1 56 between the end of 2021 and september 2022 the company repaid its short term debt thereby reducing current liabilities and sending the working capital ratio comfortably above 1 0 on its march 31 2022 balance sheet microsoft reported 153 922 billion of total current assets this was comprised of cash cash equivalents short term investments accounts receivable inventories and other current assets the company reported total assets of 344 607 billion of total assets though all long term assets are excluded from gross working capital microsoft also reported 77 4 billion of total current liabilities while this amount would be subtracted from current assets to arrive at net working capital it is excluded from consideration for gross working capital therefore as of march 31 2022 microsoft carried 153 922 billion of gross working capital 1