Which of the following definitions of working capital gap (WCG)is accurate?
A)WCG = age of inventory - age of receivables - age of payables
B)WCG = Age of receivables - age of inventory - age of payables
C)WCG = age of payables - age of inventory - age of receivables
D)WCG = age of inventory + age of receivables - age of payables

Question

Quizplus · Accepted Answer

Working capital gap (WCG) is the difference between a company's current assets and current liabilities. The age of inventory and the age of receivables should be added together as they both represent cash that is not yet collected by the company. However, the age of payables represents cash that the company owes to others, which is deducted from the sum of age of inventory and the age of receivables. Therefore, the accurate formula for WCG is D: WCG = age of inventory + age of receivables - age of payables.

Which of the Following Definitions of Working Capital Gap (WCG)is