A small company has current assets of $112,000 and current liabilities of $117,000.Which of the following statements about that company are most likely to be true?
A)Since net working capital is negative,the company will not have enough funds to meet its obligations.
B)Since net working capital is high,the company will likely have little difficulty meeting its obligations.
C)Since net working capital is very high,the company will have ample money to invest after it meets its obligations.
D)Since net working capital is nearly zero,the company is well run and will have little difficulty attracting investors.

Question

Quizplus · Accepted Answer

The company has a negative net working capital, which means it does not have enough current assets to cover its current liabilities. This indicates that the company may have difficulty meeting its obligations and could potentially face financial distress.

A Small Company Has Current Assets of $112,000 and Current