Net Working Capital Is Important Because It Is a Measure

question 46

True/False

Net working capital is important because it is a measure of a firm's liquidity and represents the net short-term investment the firm keeps in the business.

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Definitions:

Trial Balance

An accounting report that lists the balances of all ledgers accounts to check the mathematical accuracy of the bookkeeping system.

Debit Balance

Refers to the excess of debits over credits in an account, indicating either an increase in assets or expenses or a decrease in liabilities, equity, or income.

Debits

Entries that are made on the left side of an account, representing an increase in assets or expense accounts or a decrease in liability, equity, or revenue accounts.

Credits

Accounting entries that increase liabilities or decrease assets, representing the opposite of debits in the double-entry bookkeeping system.