working capital is defined as a. total current assets minus total current liabilities b. establishing progress payments to cover cash flow c. all debts and obligation owed but the business d. current assets minus current liabilities

working capital is defined as a. total current assets minus total current liabilities b. establishing progress payments to cover cash flow c. all debts and obligation owed but the business d. current assets minus current liabilities

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter2: Introduction To Financial Statements

Section: Chapter Questions

Problem 17MC: Working capital is an indication of the firms ________. A. asset utilization B. amount of noncurrent...

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Question

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Definition Definition Net amount of cash that an entity receives and expends over the course of a given period. For a business to continue operating, positive cash flows are required, and they are also necessary to produce value for investors. Investors in particular prefer to see growing cash flows even after capital expenditures have been paid for (which is known as free cash flow).

Expert Solution

Step 1

For every day business and routine activities of business, business needs working capital. It means how much excess current assets are there to pay out current liabilities.

Working capital = Current Assets - Current Liabilities

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