Which term describes the amount left after subtracting current liabilities from current assets?

Which term describes the amount left after subtracting current liabilities from current assets?

• A. Current Assets
• B. Net Current Assets/Working Capital
• C. Net Assets
• D. Capital

Answer: (B)

Short-term liquidity is being tested here. Subtracting current liabilities from current assets gives the amount available to fund daily operations. This is called net current assets, commonly known as working capital. Current assets are the resources the business has now; subtracting near-term obligations shows how much cushion there is to cover bills. Net assets would be total assets minus total liabilities (a broader measure of value), and capital refers to funds invested. So the term that describes the amount left is net current assets/working capital.

Short-term liquidity is being tested here. Subtracting current liabilities from current assets gives the amount available to fund daily operations. This is called net current assets, commonly known as working capital. Current assets are the resources the business has now; subtracting near-term obligations shows how much cushion there is to cover bills. Net assets would be total assets minus total liabilities (a broader measure of value), and capital refers to funds invested. So the term that describes the amount left is net current assets/working capital.