The amount of current assets minus current liabilities is called:

• A. Retained earnings
• B. Gross profit
• C. Working capital
• D. Net accounts receivable

Answer: (C)

Verified step by step guidance

1. Understand the concept of working capital: Working capital is a financial metric that represents the difference between a company's current assets and current liabilities. It is used to measure a company's short-term liquidity and operational efficiency.
2. Identify current assets: Current assets are assets that are expected to be converted into cash, sold, or consumed within one year. Examples include cash, accounts receivable, inventory, and prepaid expenses.
3. Identify current liabilities: Current liabilities are obligations that are due within one year. Examples include accounts payable, short-term debt, and accrued expenses.
4. Calculate working capital: The formula for working capital is: $\mathrm{Working}\mathrm{Capital}=\mathrm{Current}\mathrm{Assets}-\mathrm{Current}\mathrm{Liabilities}$. Subtract the total current liabilities from the total current assets to determine the working capital.
5. Interpret the result: A positive working capital indicates that the company has sufficient short-term assets to cover its short-term liabilities, while a negative working capital may signal liquidity issues.