QUESTION 1
Which one of the following is defined as a firm’s short-term assets and its short-term liabilities?
working capital
debt
investment capital
net capital
capital structure

Working capital is like the cash buffer that keeps a business running smoothly on a day-to-day basis. It represents the difference between current assets, such as cash and inventory, and current liabilities, like accounts payable. Essentially, it’s a financial health check-up for a business in the short term!

In the real world, think of working capital as the fuel for your small business engine. If you have positive working capital, it means you can cover your short-term obligations and invest in growth opportunities. However, negative working capital can lead to cash flow issues, making it crucial for businesses to keep this balance in check!