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Difficulty: EasyTypes and Sources of Business Capital

A commercial enterprise records total current assets of ₦950,000₦950,000 and current liabilities of ₦400,000₦400,000 at the end of its financial year. What is the net working capital of the enterprise in Naira?

Answer: 550000 ₦

Answer

The net working capital of the enterprise is ₦550,000₦550,000.
Working capital measures a firm's operational liquidity and is calculated by subtracting current liabilities from current assets (₦950,000−₦400,000=₦550,000₦950,000 - ₦400,000 = ₦550,000).

Step-by-Step Solution

1
Identify current assets and current liabilities from the problem statement
Current Assets = ₦950,000₦950,000, Current Liabilities = ₦400,000₦400,000
Working capital measures short-term liquidity derived from short-term financial items.
2
Subtract current liabilities from current assets using the working capital equation
₦950,000−₦400,000=₦550,000₦950,000 - ₦400,000 = ₦550,000
Net working capital represents the net operational funds available to support day-to-day business activities.

Key Concept

Working Capital Calculation
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Topics

Types and Sources of Business Capital

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