Practicing Success
Identify the concept that refer to the difference between current assets and current liabilities. |
Gross working capital Working capital Net working capital Fixed capital |
Net working capital |
The correct answer is option (3) : Net working capital The concept that refers to the difference between current assets and current liabilities is Net Working Capital Net Working Capitals is a measure of companys liquidity and its ability to meet short-term financial obligations. It is calculated by subtracting the total current liabilities from the total current assets. This calculation reflects the net amount of funds a company has available in the short term to support its day-to-day operations, repay short-term debts, and invest in working capital. Gross Working Capital refers to the total current assets without considering current liabilities. It represents the company's overall short-term resources but doesn't account for the short-term obligations. Fixed Capital represents the long-term capital investments in a business, such as machinery, equipment, and buildings, and is distinct from working capital, which deals with short-term assets and liabilities. |