Net working capital is determined from the difference between current assets and current liabilities.
Current liabilities represent short term obligations of a company that are required to be met within a period of one year or less. The current assets of the company are used to repay the current liabilities. Current liabilities are used in the denominator to compute all the liquidity ratios.
Answer and Explanation: 1
Correct answer: Option a) True.
The excess of current assets over the current liabilities is called working capital. It is the...
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fromChapter 8 / Lesson 11
This lesson explains what working capital is, how it is used in a business, and why businesses need working capital to stay functional. We'll also look at the formula used to calculate working capital.