CA Intermediate · Financial Management and Strategic Management · Introduction to Working Capital Management
A firm has current assets of ₹6,40,000 and current liabilities of ₹4,00,000. Which of the following correctly gives its net working capital (also called net current assets)?
Net working capital is current assets minus current liabilities. Here that is ₹6,40,000 less ₹4,00,000, which gives ₹2,40,000. It represents the part of current assets financed from long-term sources rather than by short-term creditors.
- A₹10,40,000
- B₹2,40,000Correct
- C₹1,60,000
- D₹4,00,000
Explanation
Net working capital = current assets - current liabilities = 6,40,000 - 4,00,000 = ₹2,40,000. Adding the two figures (₹10,40,000) is a sign error, and ₹4,00,000 merely repeats current liabilities.
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