COST ACCOUNTING
INFORMATION FOR DECISION MAKING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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subtracting cash outflow from cash inflow
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subtracting total liabilities from total assets
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calculating the total value of liquid assets
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subtracting total expenses from total revenue
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Detailed explanation-1: -Working capital is calculated by subtracting current liabilities from current assets, as listed on the company’s balance sheet. Current assets include cash, accounts receivable and inventory. Current liabilities include accounts payable, taxes, wages and interest owed.
Detailed explanation-2: -Working capital is computed by obtaining the difference of current assets and current liabilities. This is an example of liquidity ratio and only concerns the short-term finances and sources of the company. Thus, it does not cover long-term liabilities and long-term assets as it generally concerns solvency ratios.
Detailed explanation-3: -To calculate your net worth, you subtract your total liabilities from your total assets. Total assets will include your investments, savings, cash deposits, and any equity that you have in a home, car, or other similar assets. Total liabilities would include any debt, such as student loans and credit card debt.
Detailed explanation-4: -Net working capital = current assets (less cash) – current liabilities (less debt)