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      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.

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