SSC Economics Sample Paper NCERT Sample Paper-4

  • question_answer
    'Working Capital' in a business means

    A)  Its circulating assets, stocks, cash and debt owing to it.

    B)  The investment made in it.

    C)  Its priced assets

    D)  The amount spent on machinery or for building up stock

    Correct Answer: A

    Solution :

    [a] Working capital the cash available for day-to- day operations of an organization. Strictly speaking, one borrows cash (and not working capital) to be able to buy assets or to pay for obligations. Also called current capital. In Accounting: Net liquid assets computed by deducting current liabilities from current assets. The amount of available working capital is a measure of a firm's ability to meet its short-term obligations. Sources of working capital are (1) net income, (2) long-term loans, (3) sale of capital assets, and (4) injection of funds by stockholders. Ample working capital allows management to take advantage of unexpected opportunities, and to qualify for bank loans and favourable trade credit terms. In the normal trade cycle of a company, working capital equals working assets. Also called net current assets.

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