Which one of the following statements concerning net working capital is correct? Select one: A. An increase in net working capital must also increase current assets. B. Net working capital is a part of the operating cash flow. C. Net working capital increases when inventory is sold for cash at a profit. D. The lower the value of net working capital is, the greater is the ability of a firm to meet its current obligations. E. Firms with equal amounts of net working capital are also equally liquid.

If there is increase in current assets there will be an increase in net working capital, or alternatively the balance of current liabilities decreases.

Therefore statement a is not correct,

While preparing cash flow statement, change in net working capital is shown under operating activities, thus it forms part of operating activities, therefore, statement B is correct.

Even when inventory is sold on credit accounts receivables increase and accordingly net working capital increases, thus there is no need for sale in cash to increase net working capital.Thus statement C is incorrect

Lower value of net working capital does not state high efficiency to meet the current liabilities.Thus statement D is incorrect.

No firms might have same working capital but, they might not be liquid equally, one might have more cash rather than accounts receivables and other vice versa, thus statement E is incorrect.

The correct statement is

B. Net working capital is a part of the operating cash flow.