A small company has current assets of $112,000 and current liabilities of $117,000.Which of the following statements about that company is 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.
E)Since net working capital is negative,the company will likely have little difficulty meeting its obligations.

Question

Quizplus · Accepted Answer

Net working capital is calculated as current assets minus current liabilities. In this case, it is $112,000 - $117,000 = -$5,000, which is negative. This indicates that the company might not have enough funds to meet its short-term obligations.

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