What is Operating Working Capital? (definition)

• A. Current assets minus cash minus current liabilities plus debt.
• B. Current assets minus current liabilities.
• C. (Current assets - Cash) - (Current liabilities - Debt).
• D. Net income minus working capital.

Answer: (C)

Operating working capital focuses on the resources and obligations tied to day-to-day operations, excluding financing items like cash and debt. To capture only the operating part, you remove non-operating cash from current assets and exclude debt from current liabilities. That yields (Current assets - Cash) - (Current liabilities - Debt), which is exactly how operating working capital is defined.

Why this fits: it isolates operating assets (accounts receivable, inventory, and other operating current assets) from operating liabilities (accounts payable, accrued expenses, and other operating current liabilities), removing cash (a non-operating asset) and debt (a financing item). The other options mix in debt or cash inappropriately or rely on profitability (net income), which isn’t what operating working capital measures.