Which of the following statements about net working capital (NWC)is correct?
A) NWC is positive for all firms.
B) As NWC decreases, potential liquidity increases.
C) NWC excludes inventory, which is deemed illiquid.
D) NWC is negative if current liabilities exceed current assets.

Question

Quizplus · Accepted Answer

Net working capital (NWC) is calculated as current assets minus current liabilities. If current liabilities exceed current assets, the result is a negative NWC. This can indicate liquidity issues as the company may have trouble meeting short-term obligations. Therefore, statement D is the correct statement.

Which of the Following Statements About Net Working Capital (NWC)is