Accounting · Financial Analysis
A manufacturing unit, 'Heavy Machines Corp.', has the following financial metrics for 2025: - Current Assets (CA): Rs. 4,00,00,000 - Current Liabilities (CL): Rs. 2,50,00,000 - Long-Term Debt: Rs. 5,00,00,000 The bank sanctioned a Working Capital Term Loan (WCTL) of Rs. 50,00,000, which is treated as a Current Liability for the first year of repayment. If the company uses the entire Rs. 50,00,000 WCTL to finance its Inventory (Current Asset), which statement correctly identifies the change in Net Working Capital (NWC) and the resulting Current Ratio (CR) after the WCTL is drawn?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1NWC remains unchanged at Rs. 1,50,00,000, and CR decreases to 1.50.✓
- 2NWC increases by Rs. 50,00,000 to Rs. 2,00,00,000, and CR increases to 1.80.
- 3NWC decreases by Rs. 50,00,000 to Rs. 1,00,00,000, and CR remains at 1.60.
- 4NWC remains unchanged at Rs. 1,50,00,000, and the Current Ratio increases to 1.67.
Correct answer
NWC remains unchanged at Rs. 1,50,00,000, and CR decreases to 1.50.
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