The day-to-day money available to a business; calculated as the difference between a firm's liquid assets and its short-term debts.

• A. Cash Flow
• B. Assets
• C. Working Capital
• D. Sources of Finance

Answer: (C)

Working capital measures the day-to-day money available to a business. It’s the net amount available in the short term, calculated as current assets that can be quickly turned into cash minus current liabilities, the short-term debts the firm must pay. This shows the firm’s short-term liquidity and its ability to fund daily operations—pay suppliers, wages, and other immediate expenses. When current assets exceed current liabilities, there is positive working capital, indicating the business can cover its day-to-day needs. If current liabilities outweigh current assets, liquidity pressures can arise.

Cash flow is about the timing of cash in and out over a period, not the stock of liquid resources at a point in time. Assets are the resources the business owns, and sources of finance are ways to raise funds, not the measure of day-to-day liquidity.