Net working capital is important because it is a measure of liquidity and represents the net short-term investment the company keeps in the business.

Question

Quizplus · Accepted Answer

Net working capital is the difference between current assets and current liabilities, and it reflects the company's ability to meet its short-term obligations. Having a positive net working capital indicates that the company has enough short-term assets to cover its short-term debts. This makes it a crucial measure of liquidity and financial health of a business.

Net Working Capital Is Important Because It Is a Measure