A small company has current assets of $112,000 and current liabilities of $117,000. Which of the following statements about that company are most likely to be true?

Question

Quizplus · Accepted Answer

Net working capital is calculated by subtracting current liabilities from current assets. In this case, the net working capital is -$5,000, indicating that the company does not have enough current assets to cover its current liabilities. This raises concerns about the company's ability to meet its short-term obligations. Option A is incorrect because the high net working capital doesn't indicate that the company will have little difficulty meeting its obligations. Option B is incorrect because net working capital being nearly zero doesn't indicate that the company is well-run and can attract more investors. Option D is incorrect because although net working capital is high, it doesn't indicate that the company will have ample money to invest after meeting its obligations.

A Small Company Has Current Assets of $112,000 and Current