An increase in current assets increases net working capital, thereby reducing the risk of technical insolvency.

Name: An increase in current assets increases net working capital, thereby reducing the risk of technical insolvency.
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Question

Quizplus · Accepted Answer

Net working capital is calculated as current assets minus current liabilities. Therefore, an increase in current assets would increase net working capital, leading to a lower risk of technical insolvency as there are sufficient current assets to meet short-term obligations.

An Increase in Current Assets Increases Net Working Capital, Thereby