📢 Too many exams? Don’t know which one suits you best? Book Your Free Expert 👉 call Now!

    Question

    A trader has current assets of ₹6,00,000, including

    ₹80,000 cash, ₹1,20,000 accounts receivable, ₹3,00,000 inventory, and ₹1,00,000 marketable securities. Current liabilities total ₹2,50,000, of which ₹50,000 are short-term bank loans and the rest are trade payables. Calculate the net working capital and comment on the firm’s short-term liquidity position.
    A NWC = ₹3,50,000 – Weak liquidity Correct Answer Incorrect Answer
    B NWC = ₹3,50,000 – Strong liquidity Correct Answer Incorrect Answer
    C NWC = ₹3,50,000 – Moderate liquidity Correct Answer Incorrect Answer
    D NWC = ₹3,00,000 – Strong liquidity Correct Answer Incorrect Answer
    E NWC = ₹4,00,000 – Weak liquidity Correct Answer Incorrect Answer

    Solution

    NWC = CA – CL = ₹6,00,000 – ₹2,50,000 = ₹3,50,000. Given the high inventory proportion, liquidity is moderate, not fully strong.

    Practice Next
    More Accounts Questions
    ask-question