Business FinancesQuestion 1205 of 1632
A contractor's current assets are $90,000 and current liabilities are $120,000. His working capital is:
a.$210,000
b.-$30,000
c.$30,000
d.$0
Explanation
Working capital is current assets less current liabilities: $90,000 - $120,000 = -$30,000, and a negative figure means the short-term bills exceed the short-term resources. $210,000 comes from adding the two instead of subtracting. $30,000 is the same answer with the sign dropped, which reverses its meaning. $0 assumes working capital cannot go below zero, and the whole point of the measure is that it can.
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