6. The excess of current assets over current liabilities is known as:
(A) Net current assets
(B) Net working capital
(C) Working capital
(D) All of these
Answers
Answer:
(C) Working capital
The excess of current assets over current liabilities is known as: (C)Working capital
Explanation:
Working capital, otherwise called net working capital (NWC), is the contrast between an organization's current resources —, for example, cash, money due/clients' neglected bills, and inventories of unrefined components and completed merchandise — and its current liabilities, like records payable and obligations.
Drivers of Working Capital
Organizations have both transient resources and liabilities. An organization's momentary resources are called current resources, while transient liabilities are called current liabilities. An organization's working capital is the distinction between the worth of the current resources and its current liabilities for the period.
Answer:
The correct option is C) Working Capital.
“Working Capital is the excess of Current Assets over current liabilities.”
Explanation:
There are two concepts of working capital like. quantitative and qualitative.
According to quantitative concept, the amount of working capital refers to ‘total of current assets’. Current assets are considered to be gross working capital in this concept.
The qualitative concept gives an idea regarding source of financing capital.
According to qualitative concept the amount of working capital refers to “excess of current assets over current liabilities.”
L.J. Guthmann defined working capital as “the portion of a firm’s current assets which are financed from long–term funds.”
The excess of current assets over current
liabilities is termed as ‘Net working capital’. In this concept “Net working capital” represents
the amount of current assets which would remain if all current liabilities were paid.
Both the concepts of working capital have their own points of importance. “If the objectives is
to measure the size and extent to which current assets are being used, ‘Gross concept’ is useful;
whereas in evaluating the liquidity position of an undertaking ‘Net concept’ becomes pertinent
and preferable