Working capital can be computed by taking current assets minus current _____.

• A. equity
• B. expenses
• C. liabilities
• D. revenue

Answer: (C)

Verified step by step guidance

1. Understand the concept of working capital: Working capital is a measure of a company's short-term financial health and operational efficiency. It is calculated as the difference between current assets and current liabilities.
2. Identify the components of current assets: Current assets include items such as cash, accounts receivable, inventory, and other assets that are expected to be converted into cash within a year.
3. Identify the components of current liabilities: Current liabilities include obligations such as accounts payable, short-term debt, and other liabilities that are due within a year.
4. Set up the formula for working capital: The formula is Working Capital = Current Assets - Current Liabilities. Using MathML, this can be expressed as: $\mathrm{Working Capital}=\mathrm{Current Assets}-\mathrm{Current Liabilities}$
5. Apply the formula to compute working capital: Subtract the total value of current liabilities from the total value of current assets to determine the working capital. This calculation helps assess whether the company has enough short-term assets to cover its short-term liabilities.