Question

What is net working capital?

Answer 1

Net Working Capital refers to the surplus (excess) of current assets over current liabilities. It represents the difference between current assets and current liabilities. 

Net Working Capital = Current Assets – Current Liabilities

Current assets include items such as cash on hand, bank balances, sundry debtors, accounts receivable, marketable securities, inventory, and prepaid expenses. On the other hand, current liabilities consist of sundry creditors, bills payable, short-term loans (due within one year), and outstanding expenses.