Question

Net working capital is equal to group of answer choices

O current assets plus current liabilities.
O all current assets.
O current assets divided by current liabilities.
O current assets minus current liabilities.
O all current liabilities.

Answer 1

Net working capital is calculated by subtracting current liabilities from current assets, reflective of a company's operational efficiency.

Step-by-step explanation:

Net working capital is a key financial metric that represents the liquidity and operational efficiency of a business. To accurately calculate net working capital, we subtract a company's current liabilities from its current assets. This can be aligned with understanding T-accounts, where the net worth (or equity) is also determined by subtracting total liabilities from total assets. In a bank's T-account, this is essential as assets must equal liabilities plus net worth for the bank to remain solvent.

**Net working capital** is equal to **current assets minus current liabilities**. It represents the amount of money that a company has available for day-to-day operations.

Net working capital is a measure of a company's liquidity and its ability to meet short-term obligations. It provides insight into the financial health of a company.

For example, if a company has $100,000 in current assets and $70,000 in current liabilities, its net working capital would be $30,000 ($100,000 - $70,000 = $30,000).