Net working capital is defined as:
A)the depreciated book value of a firm's fixed assets.
B)the value of a firm's current assets.
C)available cash minus current liabilities.
D)total assets minus total liabilities.
E)current assets minus current liabilities.

Question

Quizplus · Accepted Answer

Net working capital is calculated by subtracting a company's current liabilities from its current assets. This measurement gives insight into a company's short-term liquidity, by evaluating how much cash and assets are available to cover its short-term obligations. Net working capital is defined as current assets minus current liabilities, so the correct choice is E. The other choices either do not involve current assets and liabilities or subtract liabilities from assets without specifying which types of assets and liabilities to use, making them incorrect.

Net Working Capital Is Defined As