What does the term net working capital typically refer to?

Net working capital is a financial metric that is used to assess a company's short-term liquidity and operational efficiency. It is calculated by subtracting the company's current liabilities from its current assets. This formula represents the funds available for day-to-day operations and serves as an important indicator of financial health.

When a company has a positive net working capital, it suggests that it has more current assets than current liabilities, which means it is in a position to pay off its short-term obligations and invest in its operations. Conversely, negative net working capital indicates that a company may have liquidity issues, potentially leading to difficulties in meeting its short-term debts.

The other options do not accurately reflect the definition of net working capital. Total assets minus total liabilities represents the concept of net worth or equity, which encompasses more than just the current operating cycle. Long-term assets minus long-term liabilities focuses on long-term financial health rather than the immediate liquidity situation. Finally, fixed assets minus current liabilities does not account for current assets, which are critical to the net working capital calculation.