Net working capital is defined as

Question

Quizplus · Accepted Answer

Net working capital is calculated as the difference between current assets (such as cash, accounts receivable, and inventory) and current liabilities (such as accounts payable and accrued expenses). This metric is important because it helps businesses determine if they have enough cash flow to cover their short-term obligations. Option A is incorrect because it only includes one component of net working capital. Option C is incorrect as it refers to the present value of future cash flows rather than current assets and liabilities. Option D is incorrect because it includes long-term assets and liabilities.

Net Working Capital Is Defined as