Which of the following is true of net working capital?
A) When current assets of a firm exceed its current liabilities,a firm is said to have negative net working capital.
B) When current assets of a firm are less than its total assets,a firm is said to have positive net working capital.
C) When current assets of a firm exceed its current liabilities,a firm is said to have positive net working capital.
D) When current assets of a firm exceed its total assets,the firm is said to have negative net working capital.

Question

Quizplus · Accepted Answer

Net working capital is defined as the difference between a firm's current assets and its current liabilities. Therefore, when current assets exceed current liabilities, the result is positive net working capital. Choice A and D are incorrect because they state the opposite of what positive net working capital signifies. Choice B is incorrect because it relates to the comparison of current assets and total assets, which is not the definition of net working capital.

Which of the Following Is True of Net Working Capital