How is working capital calculated?
A)(total current assets)minus (total current liabilities)
B)(total current assets)minus (inventories and prepaid assets)
C)(total current assets)divided by (total current liabilities)
D)(total current assets)
E)(total current liabilities)

Question

Quizplus · Accepted Answer

Working capital is calculated by subtracting total current liabilities from total current assets, which gives us the amount of capital available to fund day-to-day operations. Option A is the correct choice as it involves subtracting current liabilities from current assets. Option B involves subtracting inventories and prepaid assets, which is not the correct method. Option C involves dividing current assets by current liabilities, which is incorrect. Option D involves only considering current assets and not current liabilities, which is incorrect. Similarly, option E involves only considering current liabilities and not current assets, which is also incorrect.

How Is Working Capital Calculated