Question
A firm has current assets of ₹8 lakh and current
liabilities of ₹5 lakh. If it collects ₹1 lakh from debtors and uses it to pay creditors, what happens to working capital?Solution
Working capital = CA – CL = ₹8L – ₹5L = ₹3L On collection: Debtors ↓ ₹1L, Cash ↑ ₹1L → no change in CA Payment to creditors: Cash ↓ ₹1L, CL ↓ ₹1L → net WC remains unchanged
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