Practice question · Multiple choice
A company has current assets 80 and current liabilities 110. What does this tell us?
Hints
- Net working capital = current assets minus current liabilities.
- .
Show the answer
D. Negative working capital
Why
Working capital is . The firm cannot cover all short-term bills from short-term assets alone, it needs either new financing or fast cash generation.
Practise The Balance Sheet
The app has 6 more questions on this lesson, and keeps your place in the course. Business I is free to start.
More questions on The Balance Sheet
- A firm with negative net working capital is always insolvent.
- Current or non-current? Classify each item.
- Match each balance-sheet ratio to what it measures.
- A supermarket chain runs with negative working capital year after year and is perfectly healthy. How?
- Which items belong in the equity section of the balance sheet?
- Order balance-sheet items from most liquid to least liquid.