Question

At the beginning of the year, a firm has current assets of 394 and current liabilities of 255. At the end of the year, the current assets were 431 and the current liabilities were 295. What is the change in net working capital?

Answer 1

Net working capital decreases by 3

Step-by-step explanation:

Net working capital is the aggregate amount of all current assets and current liabilities and is used to measure the short-term liquidity of a business. Net working capital is calculated by the formula:

Net working capital = Current assets - Current liabilities

At the beginning of the year, Net working capital = 394 - 255 = 139

At the end of the year, Net working capital = 431 - 295 = 136

Net working capital decreases by 3