What is the measure of finance available for daily operations, calculated as current assets minus current liabilities?

• A. Working Capital
• B. Net Assets
• C. Capital Employed
• D. Book Value

Answer: (A)

Working capital measures the funds a business has to finance its day-to-day operations. It’s calculated as current assets minus current liabilities.

Current assets are resources that are expected to be turned into cash within a year, such as cash, accounts receivable, inventory, and other short‑term assets. Current liabilities are obligations due within a year, like accounts payable, short‑term loans, and accrued expenses.

A positive result shows the business can cover its short‑term obligations and still have resources to run daily activities, such as paying suppliers and wages. A larger positive amount indicates greater liquidity, while a negative or very small amount signals potential liquidity problems and may require drawing on credit or selling assets.

This concept differs from net assets, which relates to the total value of assets minus liabilities on a broader balance sheet and reflects equity. Capital employed refers to the long‑term funds used by the business (often total assets minus current liabilities or equity plus non‑current liabilities) and is about the capacity to fund operations and growth rather than immediate day‑to‑day needs. Book value is the accounting value of assets or equity, not a measure of short‑term liquidity.