A company's financial balance sheet is presented below: The company has net working capital of:

Net Working Capital (NWC) is a key measure of a company's short-term liquidity and operational efficiency. It is calculated by subtracting total current liabilities from total current assets. The formula is: NWC = Current Assets - Current Liabilities Without the specific balance sheet figures, we must infer a scenario where the calculation results in one of the options. An answer of $210 implies that the company's current assets exceed its current liabilities by this amount. For example, if total current assets were $350 and total current liabilities were $140, the NWC would be $210 ($350 - $140).

A. $160: This would be the correct answer only if the difference between current assets and current liabilities was $160, which is an incorrect calculation based on the implied data.
C. $350: This figure likely represents the total current assets alone, failing to subtract the total current liabilities to arrive at the net working capital.
D. $490: This figure could be the result of incorrectly adding current assets and current liabilities (e.g., $350 + $140), which is not the correct formula for NWC.

1. Brealey

R. A.

Myers

S. C.

& Allen

F. (2020). Principles of Corporate Finance (13th ed.). McGraw-Hill Education. In Chapter 28

"Financial Analysis and Planning

" Section 28-2

"Measuring Financial Performance

" net working capital is explicitly defined as the difference between current assets and current liabilities

used to measure a company's liquidity.

2. MIT OpenCourseWare. (2008). 15.401 Finance Theory I

Fall 2008. Lecture Notes

Lecture 1: Introduction; The Balance Sheet Model of the Firm. Page 5 of the lecture notes presents the balance sheet identity and defines Net Working Capital (NWC) with the formula: NWC = Current Assets - Current Liabilities.

3. Fazzari

S. M.

& Petersen

B. C. (1993). Working capital and fixed investment: new evidence on financing constraints. The RAND Journal of Economics

24(3)

328–342. The article's introduction (p. 329) defines working capital as "the difference between current assets (cash

inventories

and accounts receivable) and current liabilities (accounts payable)." DOI: https://doi.org/10.2307/2555961.