Which one of the following statements concerning net working capital is correct?
A) Net working capital is negative when current assets exceed current liabilities.
B) Net working capital includes cash, accounts receivables, ﬁxed assets, and accounts payable.
C) Inventory is a part of net working capital.
D) The change in net working capital is equal to the beginning net working capital minus the ending net working capital.
E) Net working capital includes accounts from the statement of comprehensive income.

Question

Quizplus · Accepted Answer

Net working capital refers to the difference between current assets and current liabilities. Inventory is a current asset and is included in the calculation of net working capital. A is incorrect as net working capital is positive when current assets exceed current liabilities. B is incorrect as fixed assets are not considered part of current assets in the calculation of net working capital. D is incorrect as the change in net working capital is calculated as ending net working capital minus beginning net working capital. E is incorrect as accounts from the statement of comprehensive income are not included in the calculation of net working capital.

Which One of the Following Statements Concerning Net Working Capital