Chapter 13, Problem 6DQ

To determine

Balance sheet:

Balance sheet is a part of financial statements that lists company‘s assets, liabilities and shareholders‘ fund. It is prepared at the end of accounting period and informs about company‘s financial position on that day.

Working capital: It measures the amount of current assets of a company over and above its current liabilities. A positive working capital is preferred in any business.
The formula to calculate working capital is,

$\text{Working}\text{Capital}=\text{Current}\text{Assets}-\text{Current}\text{Liability}$

Current liability: Every company has some debts or liabilities which need to be paid in less than one year or during current accounting period. Those debts or liabilities are called current liabilities.

Current Assets: Every company has some assets which need to be convertible in less than one year or during current accounting period. Those assets are called current assets.

To identify: The reasons for which working capital is given special attention in the process of analyzing balance sheet.