What is the difference between current assets and current liabilities?

A. Working capital
B. nominal capital
C. capital employed
D. issued capital

Correct Answer:

Option A – Working capital

Explanation

The difference between current asset and current liability is known as working capital which represents operating liquidity available to business. Working capital is the capital of a business which is used in its day-to-day trading operations, calculated as the current assets – the current liabilities.

Working capital, also known as net working capital, is the difference between a company’s current assets, like cash, accounts receivable (customers’ unpaid bills) and inventories of raw materials and finished goods, and its current liabilities, like accounts payable.