Respuesta :
It will also require additional investment in net working capital
Networking Capital: What is it?
Net working capital refers to the difference on a company's balance sheet between current assets and current liabilities (NWC). It acts as a barometer of a business's liquidity and ability to cover immediate liabilities and maintain continuous operations. A positive net working capital balance is the ideal state, which is attained by having more current assets than current liabilities.
Current Assets - Current Liabilities equals Net Working Capital.
or,
Formula:
Current Assets (minus cash) - Current Liabilities equals Net Working Capital (less debt)
or,
NWC is equal to the sum of the accounts payable and the inventory.
The net working capital ratio gives a percentile representation of a company's current assets and liabilities.
Unlike the NWC, which is produced by deducting current assets from current liabilities, the ratio can be calculated by dividing assets by liabilities. This ratio, which is comparable to NWC, helps you determine whether your company has enough current assets to cover its liabilities.
Therefore, when a company grows its operations, it also needs to increase its net working capital investment.
For more information on NWC, refer to the following link:
https://brainly.com/question/21852402
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