Net Working Capital = ?
ACurrent Assets − Current Liabilities (excluding short-term bank borrowing)
BTotal Assets − Total Liabilities
CCash − Inventories
DSales − COGS
Answer & Solution
Correct answer: A. Current Assets − Current Liabilities (excluding short-term bank borrowing)
1. Net Working Capital = Current Assets − Current Liabilities, excluding short-term bank borrowing.
2. Bankers track NWC to monitor ability to weather crises.
3. Loans are often tied to a minimum NWC covenant.
_Source: ICAI BoS CA Inter Paper 6A, Ch 3 "Financial Analysis and Planning — Ratio Analysis", §3.1(e)_
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