Which term equals current assets minus current liabilities?

Which term equals current assets minus current liabilities?

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

Answer: (B)

The concept being tested is short-term liquidity—whether a business has enough resources to cover what it owes soon. Current assets minus current liabilities gives net current assets, also called working capital. This figure shows the cushion available to pay day-to-day bills and keep operations running without needing extra finance. Current assets are things the business can turn into cash within a year (like cash, stock, and amounts owed to the business), while current liabilities are what must be paid within a year (such as payables and short‑term borrowings). Subtracting the two directly measures how much readily usable funding remains to meet near-term obligations. If the result is positive, the business should manage its short-term debts; if negative, there may be liquidity issues. Net assets, by contrast, is total assets minus total liabilities and reflects overall net worth, not the short-term liquidity. Capital usually refers to the funds invested or the long-term financing base, not the immediate surplus of current assets over current liabilities.

The concept being tested is short-term liquidity—whether a business has enough resources to cover what it owes soon. Current assets minus current liabilities gives net current assets, also called working capital. This figure shows the cushion available to pay day-to-day bills and keep operations running without needing extra finance. Current assets are things the business can turn into cash within a year (like cash, stock, and amounts owed to the business), while current liabilities are what must be paid within a year (such as payables and short‑term borrowings). Subtracting the two directly measures how much readily usable funding remains to meet near-term obligations. If the result is positive, the business should manage its short-term debts; if negative, there may be liquidity issues. Net assets, by contrast, is total assets minus total liabilities and reflects overall net worth, not the short-term liquidity. Capital usually refers to the funds invested or the long-term financing base, not the immediate surplus of current assets over current liabilities.