Which among the following are considered for calculating working capital out of below mentioned balance sheet items?
A. Stock
B. Marketable Securities
C. Prepaid Expenses
D. Debentures
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → A, B and C only
Working capital is the money a business needs to run its day-to-day work. It is worked out from current assets, that is, assets which will turn into cash within a year. A long-term source of funds never enters this calculation.
(A) Stock — Considered (Correct). Stock of raw material, work in progress and finished goods is a current asset, and usually the largest one.
(B) Marketable Securities — Considered (Correct). These are short-term investments held instead of idle cash. They can be turned into cash almost at once.
(C) Prepaid Expenses — Considered (Correct). This is money already paid for a service that will be received during the year. The benefit still to come is a current asset.
(D) Debentures — Not considered (Incorrect). A debenture is a long-term borrowing and belongs to the capital structure, not to current assets or current liabilities.
NCERT (2026-27 Edition): “…Current assets are usually more liquid but contribute less to the profits than fixed assets. Examples of current assets, in order of their liquidity, are as under. |