Question

Net decrease in working capital means ________.

• A. excess of current assets over current liabilities
• B. excess of fixed assets over current liabilities
• C. excess of current liabilities over current assets
• D. excess of total assets over total liabilities

Answer 1

Answer: (C)

excess of current liabilities over current assets

Working Capital is a financial metric which represents operating liquidity available to the business. Working capital is the difference between company's current assets and current liabilities.

Current assets includes stocks, debtors, bills receivables, cash on hand, cash at bank etc.

Current liabilities includes creditors, bills payable, bank overdraft etc.

Working Capital= Current Assets- Current Liabilities

Net decrease in working capital means excess of current liabilities over current assets.