How is the working capital need calculated?
A) Working capital + Net cash
B) Fixed assets - Current liabilities
C) Current assets (except cash)- Current liabilities
D) Long-term debt - Current assets

Question

Quizplus · Accepted Answer

The working capital need is calculated as the difference between current assets (excluding cash) and current liabilities. This calculation gives a good indication of a company's short-term liquidity and ability to pay off its debts. Option A and Option D are incorrect as they do not consider current assets and current liabilities. Option B is incorrect as subtracting fixed assets from current liabilities does not give a true picture of a company's short-term liquidity.

How Is the Working Capital Need Calculated