Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

1. Introduction to Accounting

Fundamental Accounting Equation

Financial Accounting

1. Introduction to Accounting

Fundamental Accounting Equation

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Which of the following correctly expresses the formula for net working capital (NWC) using the fundamental accounting equation?

Current Assets minus Current Liabilities equals NWC.

Current Assets plus Current Liabilities equals NWC.

Current Assets multiplied by Current Liabilities equals NWC.

Current Liabilities minus Current Assets equals NWC.

Previous problemNext problem

Verified step by step guidance

Understand the concept of Net Working Capital (NWC): NWC is a measure of a company's short-term liquidity and operational efficiency. It represents the difference between current assets and current liabilities.

Recall the fundamental accounting equation: Assets = Liabilities + Equity. This equation helps us understand the relationship between a company's resources and claims against those resources.

Identify the components of NWC: Current Assets include items like cash, accounts receivable, and inventory, while Current Liabilities include obligations such as accounts payable and short-term debt.

Formulate the correct expression for NWC: Net Working Capital is calculated as Current Assets minus Current Liabilities. This formula reflects the excess of short-term resources over short-term obligations.

Verify the options provided: Compare each option to the correct formula (Current Assets - Current Liabilities = NWC) and eliminate incorrect choices based on the definition and calculation of NWC.