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Q. Explain about Net Working Capital Concept?
Net Working Capital Concept: - Net working capital demotes to the difference among current assets and current liabilities. Current liabilities are those maintains of outsiders who are expected to mature for payment within an accounting year and include bills payables, creditors and outstanding expenses. Net working capital is able to be positive or negative.
A positive net working capital will happen when current assets exceed current liabilities. A negative Net working capital takes places when current liabilities are in excess of current assets.
Net Working Capital = Current Assets - Current Liabilities
According to Lawrence. J. Gitmen: - 'The most general definition of net working capital is the difference of firm's current assets as well as current liabilities'.
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