Which term describes resources available in a business to cover short-term expenses, calculated as current assets minus current liabilities?

Which term describes resources available in a business to cover short-term expenses, calculated as current assets minus current liabilities?

• A. Billing Date
• B. Working Capital
• C. Balance Due
• D. Zoning

Answer: (B)

Working capital is the funds a business has available to cover short-term expenses. It’s calculated as current assets minus current liabilities, and it gauges liquidity and day-to-day operational flexibility. Current assets are items that can be converted to cash within a year, like cash, accounts receivable, and inventory. Current liabilities are obligations due within a year, such as accounts payable, short-term debt, and accrued expenses. A positive result means the business typically has enough resources to pay its immediate bills, purchase inventory, and meet payroll. A negative result signals potential liquidity problems. Other terms don’t describe this measure: billing date is when an invoice is issued, balance due is what a customer owes, and zoning relates to land-use regulations. These don’t capture the business’s available short-term resources relative to obligations.

Working capital is the funds a business has available to cover short-term expenses. It’s calculated as current assets minus current liabilities, and it gauges liquidity and day-to-day operational flexibility.

Current assets are items that can be converted to cash within a year, like cash, accounts receivable, and inventory. Current liabilities are obligations due within a year, such as accounts payable, short-term debt, and accrued expenses. A positive result means the business typically has enough resources to pay its immediate bills, purchase inventory, and meet payroll. A negative result signals potential liquidity problems.

Other terms don’t describe this measure: billing date is when an invoice is issued, balance due is what a customer owes, and zoning relates to land-use regulations. These don’t capture the business’s available short-term resources relative to obligations.