Net Working Capital Help

The person above me answered your question, but I can add a bit more from a theoretical point of view. 

Your operating working capital is the cash that is required to operate your business day-to-day. In the simplest example, let's say you start a business and on Day 1 you have no revenues, no costs and no inventory. The first thing you have to do is purchase raw materials, then you have to manufacture the product and let it sit on your shelves, then after a certain period of time a customer will buy it. There is a mismatch in the timing between when your suppliers demand payment and the time it takes for your customers to pay you, so you need to invest cash into the business' operations to cover this mismatch. So if your suppliers give you 10 days to pay, your inventory takes 1 day to make and sits on your shelf for 4 days before a sale, and your customer take 20 days to pay you, your cash conversion cycle is 15 days (5 + 20 - 10). So you need to invest cash to cover this mismatch of 15 days. How much exactly? It depends on what my margins and how much product you sold, but you get the point. Imagine if your suppliers gave you 25 days to pay, then you would require no cash to keep the business running since there would be no mismatch. 

I gave you this theoretical explanation for you to see that cash on hand does not factor into how much cash investment is required to operate the business. Whether I have $100 cash on hand or $1000 cash on hand, what I need to invest into the business to address the timing mismatch will be the same. For this reason including cash in the calculation would not make sense. It also wouldn't make sense because the cash position is also be affected by investing and financing activities, none of which have anything to do with the timing mismatch or the core operations of the business. 

The last point is that with valuation you don't care about how much cash is trapped in the business unless that amount changes, because the changes are the cash flows. If my OWC is $60 for the rest of my business' life, I will never see a $ of that cash until 15 days after my business ceases operations (assuming the cycle from above). The initial cash outflow of $60 to fund the mismatch occurred 20 years ago when I started my business. Since we are assuming the business will run indefinitely (going concern) and that the cash flow occurred in the past and valuation is forward looking, we don't care about it. Just the changes. 

 As more cash gets tied up in the business, that's less cash in your pocket today. As we know, a dollar today is not worth the same as a dollar tomorrow. That's why we're including changes in OWC in the UFCF formula and discounting it to get to EV, which is the value of the firm's operating assets to all investors. Cash is not part of EV because it is a non-operating asset. 

We need to reflect the fact that a customer paying us 120 days after purchase is not the same as a customer paying us immediately after. The longer customers take to pay us, the higher our AR will be at year end. Similarly, the longer we take to pay our suppliers to higher our AP at year end. So this delay is reflected when you calculate the difference at year-end and compare to the difference at the start of the year. Assuming no change in the timing of payments and receivables, changes in the margin will increase your OWC (for the same quantity) but the overall cash flow will of course be higher and reflected in the NOPAT term of UFCF. 

If you want to keep going deeper, I recommend reading "General Model of Working Capital Management" by Rodrigo Zeidan.