Asked by Aqualaquisha Lebron on Jul 15, 2024
Verified
Net working capital is defined as:
A) current assets minus current liabilities.
B) working capital minus short-term debt.
C) current assets plus current liabilities.
D) All of the above
Net Working Capital
The difference between a company's current assets and current liabilities, indicating the short-term financial health and operational efficiency of the business.
Short-Term Debt
Financial obligations that are due for repayment within one year.
Current Liabilities
Obligations expected to require cash in less than one year, usually payables and accruals.
- Pinpoint and explicate the constituents of net working capital.
Verified Answer
BJ
Brigham JacobsonJul 18, 2024
Final Answer :
A
Explanation :
Net working capital is simply the difference between current assets and current liabilities. Option A represents this accurately. Option B is incorrect, as it subtracts short-term debt from working capital instead of current liabilities. Option C is also incorrect, as it adds current liabilities to current assets instead of subtracting. Therefore, the correct answer is A - current assets minus current liabilities.
Learning Objectives
- Pinpoint and explicate the constituents of net working capital.