Which term is often used to describe the net working capital of a business?

Which term is often used to describe the net working capital of a business?

• A. Credit
• B. Capital
• C. Working Capital
• D. Balance Due

Answer: (C)

Working capital is the measure of a business’s short-term liquidity, showing how much cash and other assets are readily available to fund day-to-day operations. It’s calculated as current assets minus current liabilities, which is the net amount available to cover short-term debts and operational needs. When people refer to the net working capital, they’re talking about that difference in a concrete amount. Other terms don’t describe this liquidity measure: credit relates to lending terms, capital is a broader term for funds or assets used in the business, and balance due is the amount still owed on invoices. For example, if current assets total 200,000 and current liabilities total 120,000, the working capital is 80,000, indicating the business has 80k to finance ongoing operations.

Working capital is the measure of a business’s short-term liquidity, showing how much cash and other assets are readily available to fund day-to-day operations. It’s calculated as current assets minus current liabilities, which is the net amount available to cover short-term debts and operational needs. When people refer to the net working capital, they’re talking about that difference in a concrete amount. Other terms don’t describe this liquidity measure: credit relates to lending terms, capital is a broader term for funds or assets used in the business, and balance due is the amount still owed on invoices. For example, if current assets total 200,000 and current liabilities total 120,000, the working capital is 80,000, indicating the business has 80k to finance ongoing operations.