Difference Between Gross and Net Working Capital.

Gross Working Capital

Net Working Capital

1. 1.     Meaning

Gross Working Capital refers to the sum of the current assets. In this concept the total of the current liabilities is not deducted from the total of the current assets.

Net Working Capital refers to the difference between current assets and current liabilities. Excess of current assets over current liabilities is net working capital.

1. 2.     Financing

Current assets may be financed by both long-term sources and short-term sources of funds.

Permanent net working capital should be financed only by long-term sources.

1. 3.     Positive/ Negative Figure (+)/(-)

Gross working capital is always a positive figure. It is never a negative figure.

Net working capital may be positive or negative.

1. 4.     Nature of Information

It emphasises only on quantitative nature. It never discloses the liquidity positions.

The net working capital concept emphasises both the quantitative as well as qualitative nature.