Working capital is commonly measured as:
Correct answer: B. Current assets minus current liabilities
- A. Fixed assets minus long-term debt
- B. Current assets minus current liabilities
- C. Total assets minus total liabilities
- D. Current liabilities minus current assets
Explanation
Net working capital equals current assets minus current liabilities. It represents the short-term funds available to support routine operations. Fixed assets and long-term debt relate mainly to long-term financing decisions.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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