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Accounting Ratios — Accountancy STD 12 Commerce — Question

CBSE BoardEnglish MediumSTD 12 CommerceAccountancyAccounting Ratios1 Mark
Question
The excess of current assets over current liabilities is called as ___________.
  1. Net tangible worth
  2. Net worth
  3. Gross working capital
  4. Net working capital
✓

Answer

  1. Net working capital
Explanation:

The formula for calculation of "Net working capital" is as follows:

Net working capital = Total current assets - Total current liabilities

Net working capital is the aggregate amount of all current assets minus current liabilities. It is used to measure the short-term liquidity of a business, and can also be used to obtain a general impression of the ability of a company management to utilize assets in an efficient manner.

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