What is the formula for calculating working capital?
Practice Questions
1 question
Q1
What is the formula for calculating working capital?
Current Assets - Current Liabilities
Total Assets - Total Liabilities
Current Assets + Current Liabilities
Total Assets + Total Liabilities
Working capital is calculated using the formula: Current Assets - Current Liabilities.
Questions & Step-by-step Solutions
1 item
Q
Q: What is the formula for calculating working capital?
Solution: Working capital is calculated using the formula: Current Assets - Current Liabilities.
Steps: 4
Step 1: Identify Current Assets. These are all the assets that can be converted into cash within one year, such as cash, inventory, and accounts receivable.
Step 2: Identify Current Liabilities. These are all the obligations or debts that need to be paid within one year, such as accounts payable and short-term loans.
Step 3: Use the formula. Subtract the total Current Liabilities from the total Current Assets using the formula: Working Capital = Current Assets - Current Liabilities.
Step 4: Calculate the result. The result will give you the amount of working capital, which indicates the short-term financial health of a business.
