Acing the Interview: Everything You Need to Know to Get an Investment Banking, Hedge Fund or Private Equity Job

your inventory). If your NWC decreases, then you’ve INCREASED your cash flow (such as decreased inventory and/or decreased your accounts receivables and collected cash).

Net working capital can also be defined as Current Assets – Current Liabilities. If someone asks you what working capital is, merely say, “It is the goods needed to run the business, composed of current assets and current liabilities such as inventory, receivables, payables, accrued expenses, etc.”

Go to a large department store such as Filenes and sit in their shoe department – as I did with my mother on Labor Day weekend in 2004 – while she was trying everything on I marveled at how many shoes they had in inventory. If Filenes were to increase their inventory, they’d have to buy more