Quiz 33 – Working Capital – (Answers)

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  • Name – Quiz 33 – Working Capital – (Answers)
  • Topic – Working Capital
  • Answers with Explanation


Q1. Bank overdraft has an impact on the company’s working capital.

Ans. The given statement is True. Bank overdraft is a current liability therefore it has an impact on total working capital.


Q2. High working capital is always a good thing for the business.

Ans. The given statement is False. High working capital may indicate a lot of idle current assets. In such a case it is always subject to scrutiny and it may or may not be favourable always.


Q3. Prepaid expenses are counted in working capital.

Ans. The given statement is True. ‘Prepaid expenses’ are current assets therefore they are counted while calculating the working capital of a company.


Q4. _____ does not form part of working capital.

Ans.  Debentures are long-term liabilities therefore they do not form part of working capital. Also, the current portion of long-term debt becomes a current liability in the current accounting period.


Q5. Working Capital is mostly used to pay long-term expenses.

Ans. The given statement is False. Working capital is mostly used to pay day-to-day activities of an organization.


Q6. Current Assets = 5,000, Current Liabilities = 3,000, Gross Loss = 2,000, Working Capital = _____.

Ans. WC = CA – CL which in this case translates to 5,000 – 3,000 = 2,000.


Q7. Positive working capital is mostly bad for a company.

Ans. Positive working capital means current assets are greater than current liabilities, which in most cases is good news for the company.


Q8. Working Capital helps measure _____ of an entity.

Ans. Usually, working capital is meant for checking the liquidity of an entity.


Q9. Working capital is also known as _____.

Ans. It is also known as working assets.


Q10. Which financial statement is used to calculate the working capital?

Ans. The balance sheet shows current assets and current liabilities which are necessary to calculate the working capital.


Q11. Working Capital = Current Assets – _____.

Ans. Working capital is equal to current assets less current liabilities.


Q12. Working capital is the capital that is _____ in a company’s day-to-day operations.

Ans. It is part of a company’s total capital used or employed in everyday operations.