Question
Question 2 Which of the following equations is correct: Working capital=cash+trade receivables + inventories - trade payables - bank overdrafts Wothing capital=cashcdot trade receivables + inventories - trade payables - bank overdrafts Working capital=cash+ trade receivables + inventories+ trade payables - bank overdrafts Working capital=cash+trade receivables - inventories - tradle payables + bank overdrafts 1 pts
Answer
4.4
(278 Votes)
Darcy
Professional · Tutor for 6 years
Answer
A
Explanation
Working capital is also known as net working capital. The formula to calculate working capital is:Working Capital = Current Assets - Current LiabilitiesTherefore, the correct equation should consider a company's short-term or current assets (such as cash, trade receivables, and inventories) minus its current liabilities or short-term financial obligations (like trade payables, and bank overdrafts). So, the correct the formulation for working capital should match with this logic.