Question

Which of the following are components of Net Working Capital?

A) Cash
B) Interest Expense
C) Property Plant and Equipment
D) Inventories
E) Accounts Receivable
F) Accounts Payable
G) Shareholder's Equity
H) Cumulative Depreciation

Answer 1

Net Working Capital consists of current assets such as Cash (A), Inventories (D), and Accounts Receivable (E), and is offset by current liabilities like Accounts Payable (F). Components like Interest Expense, Property Plant and Equipment, Shareholder's Equity, and Cumulative Depreciation are not included in the Net Working Capital calculation.

Step-by-step explanation:

Net Working Capital is a key financial metric, reflecting a company's short-term financial health and its ability to cover its immediate obligations with its most liquid assets. The components of Net Working Capital include current assets and current liabilities. Current assets are items that can be converted into cash within a year, and they consist of Cash (A), Inventories (D), and Accounts Receivable (E). On the other side, current liabilities include Accounts Payable (F), which subtract from the total current assets to determine the Net Working Capital. Components like Interest Expense (B), Property Plant and Equipment (C), Shareholder's Equity (G), and Cumulative Depreciation (H) are not part of the Net Working Capital calculation as they do not represent liquid assets or immediate liabilities.