Working capital - SS2 Commerce Past Questions and Answers - page 1
What does working capital measure?
Long-term financial health
Short-term financial health
Profitability of a company
How is working capital calculated?
By subtracting current liabilities from current assets
By adding long-term liabilities to long-term assets
By dividing total assets by total liabilities
What is the primary purpose of working capital?
Cover long-term debts
Cover short-term expenses and obligations
Invest in long-term projects
Why is sufficient working capital important for a company?
To maximize profits
To avoid disruptions in operations and maintain cash flow
To invest in long-term assets
To avoid disruptions in operations and maintain cash flow
What can happen if a company has insufficient working capital?
Increased profitability
Cash flow problems and difficulty paying bills
Higher return on investment
Define working capital in simple terms.
Working capital refers to the funds or resources that a company has available to meet its day-to-day operational needs and cover short-term obligations.
Why is working capital important for a company's operations?
Working capital is important for a company's operations because it ensures that the company has enough funds to cover short-term expenses, maintain liquidity, and avoid disruptions in its day-to-day activities.