Current asset=160, current libility=100, what is the working capital?

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BlackTom AI · Accepted Answer

To start, I’ll restate what the problem is asking and list the answer choices to keep everything in view.
Question: Current asset = 160, current liability = 100, what is the working capital?
Answer options: ["60", "160", "50", "100"]
Now, evaluate each option one by one with the necessary calculations and logic:
Option 1: 60. Working capital is defined as current assets minus current liabilities. Here, 160 minus 100 equals 60, so this value aligns with the basic formula for working capital.
Option 2: 160. If someone proposed 160, they might be accidentally using only current assets and ignoring current liabilities. This ignores the obligation component and does not reflect the net short-term liquidity position.
Option 3: 50. This would result if you subtracted 110 from 160, which isn’t related to the given liability figure of 100. It incorrectly condenses the relationship between assets and liabilities.
Option 4: 100. This mirrors the amount of current liabilities but does not account for the assets side. A correct working capital figure must reflect the difference between assets and liabilities, not just the liability value.
Putting it together, the only answer that faithfully applies the standard working capital formula (current assets minus current liabilities) given 160 and 100 is 60.
Note on common pitfalls: mixing up net working capital with total current assets or total current liabilities is a frequent error; always apply the subtraction to reveal the net short-term liquidity position.
End of analysis for all choices, with each option addressed on its own merits and misinterpretations highlighted.

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Current asset=160, current libility=100, what is the working capital?

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