Identify the concept that refer to the difference between current assets and current liabilities.
Answer & explanation
Correct answer: option 3
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.
Some part of current assets is usually financed through short-term sources, i.e., current liabilities. The rest is financed through long-term sources and is called net working capital. Thus, NWC = CA – CL (i.e. Current Assets - Current Liabilities.) Thus, net working capital may be defined as the excess of current assets over current liabilities.