Nickolls Corporation has provided the following financial data:
| Cash | $ | 214,000 | |||||||||
| Accounts receivable, net | $ | 324,000 | |||||||||
| Total current assets | $ | 774,000 | |||||||||
| Total current liabilities | $ | 219,000 | |||||||||
The company’s working capital is:
Multiple Choice
$1,228,000
$555,000
$819,000
$774,000
Working capital represents the operating liquidity available to business. Working capital is calculated as total current assets minus total current liabilities. If the result is positive, then it has a positive working capital. If the result is negative, then it shows a deficit working capital.
In the above question,
Total current assets = $ 774,000
Total current liabilities = $ 219,000
Working capital = 774,000 - 219,000
Working capital = $ 555,000
Hence, option B is the correct answer.
SUMMARY:
In the question it gives the cash balance and accounts receivable. These both are included in total current assets. So we don't want to add these again.
So working capital is calculated as $ 555,000.
Hence, option B is the correct answer.
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